HARVARD BUSINESS REVIEW - Jan 11 - Computer matching started 1959. The biggest shift occurred in the mid-1990s, with the birth of online dating. 25% of U.S. couples now meet on the internet. Newer sites made matchmaking tech. an important value proposition. eharmony uses a "scientific approach to matching highly compatible singles" and OkCupid does "a lot of crazy math stuff to help people connect faster." But are the lovelorn better served for it? Upon finding a compatible partner, users typically terminate their subscription, hurting the firm’s revenue, therefore it's unclear whether profit-maximizing sites would strive for the most effective matchmaking technology, or deprioritize innovation. According to game theory, users have a better chance of finding a match in a larger community so as a firm reduces its matchmaking effectiveness, more consumers are left unmatched as time goes by, but their continued presence on the platform benefits the newly arrived consumers. Lesser technology can engender positive network effects for a firm. A commission-based model, in which matchmakers charge users based on successful matches, would align the interests of matchmakers and consumers. High-end matchmaking already operates this way. Where commissions are impractical, matchmakers could charge a sizeable, upfront payment to cover a longer subscription period. The key to achieve mutually beneficial outcomes is to resolve the matchmakers' strategy dilemma, making sure their revenue is not negatively affected by their technology innovations.
by Yue Wu & V. "Paddy" Padmanabhan
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