It all comes down to something called "asymmetrical information." Daters know more about themselves than their prospective mates. This "quality uncertainty" -- I'm using only the sexiest lingo to ensure that my own loneliness won't be caused by market failure -- affects who participates in the market. I don't simply mean that people lie about themselves on the Internet (although people do indeed lie about themselves on the Internet). In markets where quality varies, all suppliers can present their wares as first-rate, and this has negative consequences: The bad tend to drive out the good.
This "lemon market" phenomenon was first studied by George Akerlof in the used-car market, but his lesson is also true for dating, especially online. Say you're looking for a date on OkCupid. You know that the potential partners out there are of two types: good and bad. Everyone wants to find good dates -- and are wiling to lavish them with expensive dinners and whatnot -- and avoid bad ones. But there's a catch. Everyone in the market can pretend to be a good type -- say, by lying on their Internet dating profiles.
So now you have this market
where everyone is presenting themselves as a good type. Some of them are probably lying. You don't know which ones, so you'll value every potential date a little bit less than as good as they look. (Even in the real world, people are understandably willing to offer
less for the prospect of a seemingly good date when they know they might
really end up with a psycho killer or a gold-digger or a bore.) That's smart for you, maybe, but it's bad for the good types. Some of them will surely think they're much better than the tepid replies they get from other singles, and they'll respond by leaving the dating market. "Screw OkCupid," they'll
say. "I deserve more!"
The problem is that this type of movement feeds on itself. As good dates leave the market, they once again decrease the expected value of dating a self-advertised good type. This causes even more good dates to leave the market, and so on, until there aren't any left at all.
OF HALLMARKS AND MARKET FAILURES
Akerlof's original example of this kind of scenario was the used car market: There are good cars and there are lemons, and the prospect of getting a lemon drives down the price of used cars and pushes good cars out of the market. Alas, the market for love isn't quite like the market for Camrys. For one, most people are interested in more than just a first date: They want relationships -- second and third and thirtieth dates -- and if you assume that the liars are discovered and dumped over the first dinner, it might provide some incentive to tell the truth from the beginning.
But my own hunch is that there would still be some kind of market failure, especially if getting a first date -- even if it means being a bit of a letdown in person -- is viewed as more important than reducing the chance of a second. Indeed, in some ways the problem of information asymmetry in the unfettered dating market seems more intractable than it does elsewhere. The need for some sort of quality control is one reason why people join curated dating sites like eHarmony rather than OkCupid. In some industries, you have solutions in the form of licensing and regulation, or quality "guarantees" like brand names and warranties. In the real world, however, dating is a dangerously free market.