Theory of Information asymmetry and its relavence to current dating scenario

Information asymmetry occurs when one party to a transaction has more or better information than the other party. In a typical relationship, parties are assumed to reveal only that information that the other party desires to hear. Information that forms a negative impression is usually not revealed.

Parties can assimilate information from external sources, but that authenticity of the information is directly related to the source of information, the relationship of the source with the players and the market connectivity of the players. The source can sometimes be biased. For example, if A and B are in a relationship, and B tries to get information from C, who had a dating history with A, there is a possibility that information from C could be incorrect or will not reflect to A’s current character. This is based on the assumption that people change and learn from prior experiences. Again, consider the example of A and B in a relationship, and B tries to obtain information about A, from C. There is a possibility that C will provide information based on his/ her judgment of A. If B and C are good friends and C does not relate to A’s character, then C will provide negative information or will erect barriers for A and B to be together. This is why the relationship of the source with the players is an important variable. The greater the market connectivity, the greater is the source of information to each of the players. However, being more connected, does not guarantee the authenticity of the information.

If A has more information than B, then A will play his/ her cards in such a way that he/she will have an upper hand in the relationship. The player, who understands information the earliest, will be powerful initially and can succeed in obtaining a psychological advantage permanently. In the short run, this player will extract everything possible from the other and this will result in a shaky equilibrium. If A treats B, badly during the short run, the equilibrium will crumble at a point where B receives more information. In the long run, equilibrium is formed when A and B obtain all the necessary information through primary (direct interpretation of body language, behavior etc.) or secondary information (market sources). At this point, the relationship is successful.