Tag Archives: signaling

Fewer Wedding Expenses, More Guests to Stay Married Longer

A persistent advertising campaign in the United States claims that “A Diamond is Forever” and provides more explicit guidance in the rhetorical question, “How else could two months’ salary last forever?”

Andrew M. Francis

Andrew M. Francis

Emory University’s Andrew M. Francis and Hugo M. Mialon evaluated the purported connection between wedding-related expenditures to duration of marriage based on a survey of more than 3,000 ever-married volunteers in the United States.

Hugo Mialon

Hugo Mialon

They conducted a number of statistical controls across nearly 40 demographic and relationship characteristics, and found that marriage duration in this widely varied group was inversely related to expenditures on engagement ring and wedding ceremony.

Francis and Mialon noted that the wedding industry is a big business in the U.S.:  More than $50 billion in 2014, and the average wedding cost in the U.S. during 2013 was an astonishing $29,858.

However, most people in the U.S. are unable to afford this lavish expenditure because it represents about 60% of the median U.S. household income.
Further, U.S. wages are increasing at a much slower rate than increases in average wedding costs, according to the U.S. Department of Labor – only about 2% over the last several years.

As a result, expenditures of this magnitude can induce stress and disagreements among people who make financial commitments beyond their capacity, and can be associated with shorter-duration marriages.

Support for this speculation comes Francis and Mialon’s finding that women who spent more than $20,000 on the wedding – well below the average, according to TheKnot.com – are 3.5 times more likely to divorce than those who spent between $5,000 and $10,000 – still a significant sum in relation to average annual income.
Likewise, men who spent between $2,000 and $4,000 on an engagement ring ended their marriages 30% more often than those who spent between $500 and $2,000.

Margaret Brinig

Margaret Brinig

Some expenditures may be anachronisms:  Engagement rings were originally a contractual assurance if the marriage promise was breached, noted University of Toronto’s Margaret F. Brinig.
It could be argued that there may be less current-day utility for this practice in light of no-fault divorce laws in many areas of the U.S.

Lee Cronk

Lee Cronk

Similarly, premarital gifts like a ring continuously worn contain visible “signaling properties” to indicate that a woman is “in contract” to wed, remarked Rutgers University’s Lee Cronk and Bria Dunham of Boston University.

Some wedding characteristics were associated with longer-enduring marriages:  People whose weddings had higher attendance had longer-lasting marriages, perhaps related to participants having a strong social network to provide support, encouragement, and reminders of wedding promises during the inevitable challenges of marriage.

Bria Dunham

“…Weddings associated with the lower likelihood of divorce are those that are relatively inexpensive but high in attendance,” noted Francis and Mialon.

People who went on a honeymoon, regardless of cost, also tended to stay with their spouses longer than those who did not, suggesting that this ritual may reinforce the interpersonal bond after a sometimes stressful but happy event.

  • What are other financial correlates of longer-lasting marriages and relationships?

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Mitigating Pervasive “Cheap Talk” at Work, in Dating

Paul Oyer

Paul Oyer

“Cheap talk,” a game theory concept, took on personal meaning for Stanford’s Paul Oyer during his foray into the online dating “marketplace” at OkCupid.

He was candid on some parts of his profile but edited details in other areas is explained by game theory’s “cheap talk,” which suggests that the value of editing and embellishing information is based on expected utility – potential dating partners’ selection criteria – in relation to the possible cost of selective reporting – “overcoming barriers to entry” but being disqualified for lack of full disclosure.

Data from OkCupid and match.com suggest that many participants engage in cheap talk, to enhance physical attractiveness and fitness as well as income.
As a result, “profile inflators’ curatorial enhancements” (non-cooperative cheap talk) led most to discount most all claims as “cheap talk,” leading to a significant disadvantage for truthfully uninflated profiles (cooperative cheap talk), noted Oyer.

Jonathan Zinman

Jonathan Zinman

Marketing and advertising campaigns have the reputation for employing cheap talk, documented by Dartmouth’s Jonathan Zinman and Eric Zitzewitz, who found that ski resorts exaggerate snowfall, especially during periods including holidays and weekends.

Eric Zitzewitz

Eric Zitzewitz

However, external verification through real time reporting via smartphones reduced the revenue-enhancing effect of meteorological exaggeration, according to Zinman and Zitzewitz.

Like resort marketers, CEOs may engage in a cycle of optimistic forward-looking statements, based on expectations that any statement would be discounted as “cheap talk,” noted Harvard’s Jeremy Stein.

Jeremy Stein

Jeremy Stein

Similarly, before he became a member of the Federal Reserve, Stein found that official statements by the Chair of the Federal Reserve were more credible and less likely to contain “cheap talk” when a target range for inflation was announced, instead of a precise value.

Stock analysts, too, are a source of influential “cheap talk,” particularly when a company goes public, because their employer’s other services securities underwriting become more valuable, observed National Taiwan University’s Hsiou-wei Lin and Maureen McNichols of Stanford.

Hsiou-Wei Lin

Hsiou-Wei Lin

They found that analysts employed by a bank that worked with the target company provided higher forecasts than independent analysts.
As a result, the stock market was “less responsive” to assumed “cheap talk” of in-house analysts.

Maureen McNichols

Maureen McNichols

To manage “cheap talk,” Stanford’s Nobel laureate A. Michael Spence modeled signaling information to a valued target audience in the job market.
In online dating, this could be sending a virtual rose, to indicate greater-than-average interest in meeting, resulting in increased acceptance rates for participants with “average desirability” of income level and physical characteristics.

A Michael Spence

A Michael Spence

“Signaling” has become a familiar process in university application processes, when candidates indicate clear preference and intention to attend if accepted, at the “cost” of foregoing other early decision applications.

Like “signaling,” external verification of “cheap talk” claims review sites like Yelp.com, or even friend-of-a-friend accounts can increase the “cost” and reduce exaggerated claims.

-*When has “cheap talk” contributed to achieving goals?
-*How do you manage “cheap talk” by others?

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