Love Signals For Sale

By Asst Prof Au Pak Hung

Ever wondered how businesses profit from Valentines’ Day? Assistant Professor Au Pak Hung explains Cupid’s money making secrets with behavioural economics.

GRAPHIC: JONATHAN LIM

Bob asks Alice out for a date on Valentine’s Day. Alice, not knowing Bob well enough, is not sure if he is romantically interested in her.

Afraid of getting hurt, Alice does not want to go for another date unless she is sure that Bob is serious about her. While Bob loves Alice, he cannot simply talk Alice into believing it.

How, then, can Bob credibly signal his heart to Alice?

Let’s make the situation more concrete by assigning numbers to Bob’s problem.

If Bob is not serious about Alice, he would be willing to give up only $100 in exchange for going out with her. If he is serious about her, he would spend more.

Damien the businessman offers Bob a solution.

“Why don’t you buy a gift from me worth $101? While Alice does not know your heart, she knows that you are a rational person who would not give up $101 for something worth only $100,”

“The only logical conclusion that Alice can draw, after receiving your gift, is that you are serious about her, and she will accept your date,” he said.

Bob finds the argument reasonable.

He buys the gift and gives it to Alice, who, indeed, accepts the date.

The mechanism at work here is what economists call “signaling”. Bob took an action that he would not have taken, had he not been serious about Alice. The gift connected the couple.

The story does not end here. Having earned $101, Damien is still not satisfied.

He believes that when Alice knows Bob better, she would go out with him even if he does not buy a gift for her.

It does not take long before Damien figures out a plan to continue making money from Bob.

He talks to Alice before the next Valentine’s Day.

“While Bob was in love with you last year, who knows whether his heart has changed? You can only tell from his actions. If he is still serious about you, he should not hesitate to buy you another gift. If his heart has changed, he would be unwilling to do so.”

“In short, Bob still loves you only if he buys you another gift,” persuades Damien.

After convincing Alice that another gift will signal love, it is equally crucial to make sure that Bob knows that Alice has been convinced.

If Bob loves Alice, he is “forced by her belief” to buy the gift. If he does not, Alice would interpret this as a sign that his heart has changed, and would not be willing to go out with him anymore.

The loving Bob will therefore buy Alice the gift. See? Damien does not lie about Bob!

Damien talks to Alice so that he can shape the couple’s beliefs and actions to his advantage.

If Damien’s plan is successful, Bob will end up with an empty pocket every Valentine’s Day.

Damien can also use persuasion techniques (aka marketing tactics) to keep his customer.

First, he has to establish a strong tie between the gift and romantic love. The gift thus sends an unequivocal courting message to his fair lady.

Second, Damien has to generate the impression that the gift is scarce and of supreme quality.

Third, people would then associate the gift with a high price.

This way, Alice understands immediately that if the gift costs a lot to Bob, he must be serious about her.

In sum, success of the “love signal production” business hinges on coordinating people’s beliefs about how lovers behave in response to their hearts, what the gift stands for, and the value of the gift itself.

The diamond is a good example of a love signalling gift.

In the 1930s, the world-dominant diamond supplier, De Beers, initiated the famous marketing campaign “A Diamond Is Forever” in the United States.

The campaign sponsored diamond rings on star actresses in romantic movie scenes, and encouraged news coverage that featured celebrities displaying diamond rings in romantic engagements.

Furthermore, De Beers maintains an effective monopoly on diamond supplies, thereby controlling diamond prices and creating a sense of scarcity.

This strategy has been hugely successful, soaring diamond sales and creating the public belief that a diamond represents love.

Today, De Beers is a multi-billion-dollar company.

But wait a second, why does Bob have to stick with the gift from Damien?

Even if Alice becomes skeptical, the only thing that Bob needs to do to signal his love for her is to give up $101, and there is no apparent reason why buying from Damien is the only option.

Maybe he can give Alice something different but of equal value?

Diamonds and gifts with high price tags are NOT the only ways to signal love for your (potential) date.

The theory of signaling emphasises that a good signal should be credible: people who are not serious would not bother with it.

Those who are cash-strapped may consider making use of their “labour” –– they can write poems or songs, cook, and make handicrafts.

But diamonds remain one of the strongest and most influential ways of signaling love, as a result of highly successful and pervasive marketing strategy.

Assistant Professor Au Pak Hung is from the Division of Economics, School of Humanities and Social Sciences. Behavioural economics is one of his research interests.