[dheera]

> This puts the business into the situation where they have an incentive

If the payment is a one-time advance payment, I would imagine this disincentives the business to truly do their best, since they already have your money.

I would think, idealistically, maybe the best model would be an advance payment but with a money-back guarantee of say half the payment if you don't find a match through them.

Legally establishing that you don't find a match could be troublesome though, since the "couple" that actually liked each other could both claim they didn't match, get their 50% back, but you as a business would have no recourse if they got together and lived their lives happily ever after, behind your back. You don't have "rights" to their personal life together as a business.

Unless of course it was a government-run dating service that had marriage, housing, and financial records of everyone. That might work. And for many reasons it's in the best interest of the government to get as many people married as possible.

[derefr]

You don't need a refund. Just presume an efficient market of such companies, where the matchmakers who actually make matches have better reputations, and the ones who don't quickly go out of business. That's how most single-shot service-provider businesses work. (At least, the ones with clear success criteria. Psychics and the like never lose reputation, because there's no standard to measure their claims against.)

The one thing single-shot service-provider businesses (including professional human matchmakers) will do, though, is to calculate a quote for their service, corresponding to how much trouble they think your account is going to be for them. They don't usually bill more if it turns out to be even more of a challenge, but they do refine their quote process after each experience.

Though also, back to refunds: a refund guarantee doesn't need to be part of an explicit business-model, to be part of the effective business model. Dating sites charge people's credit cards. Large one-time charges from unknown companies you don't have an ongoing relationship with are exactly the type of thing that banks/credit-card companies are happy to do charge-backs for. Whether they offer refunds or not, the system will offer refunds for them — and kill their business by taking away its payment-processing if too many users ask for said refunds.

[pdpi]

> Just presume an efficient market of such companies

And those companies are in the business of matching spherical cows in a vacuum.

Efficient markets are useful as a simple model, but you don’t get to wish away real-world problems by pretending the world conforms to that model.

[derefr]

I’m talking about a game-theoretic dynamic that’s easily observed in real world professions (e.g. plumbers, cleaners, art conservators, etc.), and even in exactly the same industry (human professional matchmakers.) The “presumption” here isn’t really much of a stretch.

It just-so-happens that dating sites don’t currently follow this model, because an external force (Match Group) came in and explicitly chose to consolidate the market into a cartel, where 95% of “competing” dating sites are actually in collusion due to shared ownership. But there’s no reason to expect that situation to last forever, any more than there’s reason to expect the dominance of the currently-dominant social network (MySpace/Facebook/etc.) to last forever.

[michaelmrose]

Actually one would expect the leverage of controlling the market to provide enough funds to pay emerging players multiple times their likely expected result of rolling the dice and trying to compete to continually fend off would be rivals. Absent interference in the market one would not be extremely shocked to see the same dominant players in social media and dating 20 years from now.

[fallingfrog]

The efficient market hypothesis is wrong.

Here’s why: it assumes that the only form of power or leverage that exists is supply and demand. However there are all kinds of forms of leverage in the real world. There is legal power. Voting. Guns. Unions. Price fixing. Cultural norms. Marketing. Blackmail. All of these are forms of leverage and they are not special cases; rather, supply and demand is one special case which comprises a fraction of the total pressure on wages and prices and success or failure at any moment.