The Market Microstructure of a Love Market

Market Microstructure of Love Market

by Undergrad, V.

Abstract:

In light of the phenomena of aging demographics and a growing population of overage virgin males across developed nations, there appears to be policy gap between the efforts made by governments in inducing couples to fall in love and the lack of success accrued. Thus, this paper aims to analyse the market place of love in the absence of any governmental intervention. Specifically, it seeks to illustrate the market microstructure whereupon individuals meet members of the opposite sex in a laissez-faire setting.

Underlying assumptions and definitions

Heterosexuality among market participants

It should be apparent from the last line that the framework which this paper is predicated on, assumes heterosexuality among love market participants. i.e. the simplified model of the love market is based upon males seeking females in a love market.

With apologies to homosexual love market participants, given the lack of the expertise on the part of the author on this niche marketplace, as well as the rather volatile nature of the essentially unregulated nature of this over-the-counter (OTC) love market as seen by their allegedly ‘promiscuous and reckless lifestyle’ (Balaji circa 2004), we shall be excluding the homosexual love market structure from this discussion, which will perhaps be of future research interest to individuals with the necessary expertise.

For simplicity, in the initial analysis, we shall assume that a trade can only be conducted bilaterally (monogamous relationships) between one male and one female. Later on, we shall relax this assumption and analyse the impact of block trades which can be conducted multilaterally (other names for this form of trading include two-timing, cheating, polygamy and gangbang).

Bid and Ask ‘prices’

As with conventional market microstructures such as equity exchanges, a trade can only take place when the best bid (highest price which a buyer is willing to buy at) and best asking (lowest price which a seller is willing to sell at). Analogously, we shall be using the relative attractiveness of each individual as a proxy for his or her market price (referred to as ‘price’ hereafter). It is important to note that the love market place represents a double auction in which both buyers and sellers are essentially underlying assets themselves and thus are subject to a valuation place upon them. This point shall be further illustrated in the examples below.

Given the myriad of determinants of attractiveness as well as the endless permutations of weird fetishes which appeal to various segments on love market participants, for simplicity this paper will use an arbitrary measure of generic attractiveness based common denominators of attractiveness to the opposite sex as proxy to price. Such common denominators include physical attractiveness (looks, body shapes etc), sexual attractiveness (e.g., well-endowed crotches in males, and breasts in females), materiality (e.g. 5Cs) as well as personality. While there are possibly endless determinants for the attractiveness of individuals, it has been hypothesised that there may be some commonality in these determinants across markets which can potentially be estimated using existing ‘Attractivness Pricing Models’ such as the conventional CAPM (Carnal Attractiveness and Promiscuity Measure) as well as the various arbitrage pricing models such as the commonly used 3-factor model ( which are: penis-length-to-circumference ratio, bank-balance to estimated-years-to-mortality-ratio, and vital-statistics to IQ-score-ratio), which goes beyond the scope of this paper.

What constitutes a trade?

The characteristics of a ‘trade’ completed is also contingent on the individual motivations to trade on the part of individual participants who use the love market to solve various problems which may or may not originate from the love market place itself. The various motivations to trade and desired end of trading are plenty. They may include (but not limited to) factors such as amelioration of loneliness, venting of sexual frustration, finding a marriage partner, finding an activity partner/domestic partnership, desire to replicate the on-screen romance depicted in the latest Korean drama etc, etc. It would be therefore conceivable say that a ‘trade’ in the love market may not necessarily be analogous to a ‘coincidence of wants’ as illustrated in conventional economics when supply and demand coincide. For example, it is very possible that a male market participant who aims to use the love market to seek a female counterpart to act out his wildest sexual fantasy may eventually end up ‘trading’ and finding a female who simply wants to ‘talk, hug and cuddle’. Given the inexhaustible extenuating circumstance underlying the motivations for each individual market participant, the only meaningful inference that a trade simply the metaphoric equivalent of the oh-so-ambiguous ‘getting together’. What exactly underlies this, is probably best left to the imagination of you, the reader of this paper…

How Trade is conducted

Let us first assume that in a love market where market participants are only motivated by materiality. For example, Ah Beng who drove, Ah Lian out on a date in his midnight blue Supra complete with full body kit, will experience a surge in his attractiveness relative to other competing male participants as valued by Ah Lian. Consequently this is Ah Beng’s ‘bid-price’ in the love market representing his intention to go into a trade with Ah Lian’s underlying assets. Whether or not a trade will occur depends on the reservation price or ‘ask-price’ which is the minimum terms that is sufficient to persuade Ah Lian into willing to be the counter-party to Ah Beng’s trade. Should Ah Lian’s asking price be just a Honda Civic, Ah Beng’s trade would be more than sufficient to compensate Ah Lian’s ask price. Therefore, a trade will occur. However, should Ah Lian’s ask price be a BMW 7 series, then a trade will not occur and Ah Beng’s bid will be placed behind the market.

We shall also assume that leveraging is possible thus there can be temporal displacement of prices away from the ‘fundamental values’ of individual market participants which represents their intrinsic worth as an individual. Thus using the previous example, suppose that Ah Beng had in fact borrowed the Supra from his loan-sharking colleague, and fooled Ah Lian into believing that he owned the car. Efficient Market Hypothesis (EMH) tells us that all information pertaining to an asset will be reflected in its price. Therefore, despite his lie, Ah Beng would experience a temporarily surge in his stock value (price). However, as predicted by the Information Cascading argument in the EMH, eventually, through her gossip network, Ah Lian will soon find out that Ah Beng did not own the Supra but in fact rides a Super4, then Ah Beng will experience a mean-reversal of his stock price equivalent to all similar male participants who rides a Super4, which is also the true fundamental value/price of Ah Beng..

Double Auction and simplifying assumption of unilateral auction

That was a simplistic illustration of a unilateral transaction in which Ah Beng was solely the buyer-side of the transaction while Ah Lian was solely the seller-side of the transaction. In actuality, trades are a bilateral and represent a two-sided auction in which both market participants are valued as assets. Hence, not only is Ah Lian valuated as an asset by Ah Beng (as illustrated in the example above), Ah Beng too, is valuated as an asset by Ah Lian on his worthiness to entice her into being the counter-party to the trade he initiated. Therefore, in this respect, Ah Beng’s bid price also represents the stock price/value of himself. Using the same example, let’s say that the only determinant of the price of female participants is the size of their cleavage, and Ah Lian has a pair of bona fide size 36D tits. Let’s further assume that the market consensus is that a pair of size 36 D tits has the equivalent value to a midnight blue Supra with full-body kit. Therefore as buyer, Ah Lian would have thought that her bid price (of size 36D tits) has matched the ask price of Ah Beng (in his capacity as a seller) of a Supra, and thus completing a trade with him.

In this case, Ah Lian who traded with Ah Beng believing that he is worth a Supra but has in fact a fundamental value of a Super4, is said to have ‘lost money’ in the marketplace since she entered into a trade receiving less than what she had expected to receive to compensate her for selling. Ah Beng on the other hand, is said to have profited from the trade as a buyer, but experienced mean-reversal in his stock price as an asset holder. Ah Lian is thus said to have suffered from Ex-Post regret, which will be discussed subsequently.

However, to facilitate the ease of discussion, with apologies to female readers, I shall hereafter limit our discussion to a unilateral auction with the simplifying assumption that all male participants represent buyers while female market participants represent sellers. The motivation of doing so apart from the obvious laziness on the part of the author, is also to facilitate a more basal modelling of courtship in the mammalian kingdom where more often than not, the male species are the initiators of courtship.

Conclusion:

The issues discussed above set ups a pseudo-scientific framework to conduct an analogical analysis of love in a laissez faire environment. Further illustration will probably be contingent on the level of interest generated by this entry which -stemmed out of sheer boredom- and whether this author is able to overcome his procrastination over the final six weeks of his disastrous semester. And finally, to conclude this pretentious exercise in finals revision, and only if you happen to be blog-surfing instead of doing your assignment, HAPPY 23^rd BIRTHDAY, PUNDEH!!!!