Pricing strategies for online dating platforms by titing cui michael hamilton ssrn


Pricing Strategies for Online Dating Platforms
JEL Classification: D02, D40
Pricing Strategies for Online Dating Platforms
Online dating is the most common way for new US couples to meet, with more than three-in-ten Americans having used dating apps, and with revenues from dating apps surpassing five billion dollars annually. Most of these dating apps generate revenue through subscription-based pricing, where subscriptions for a fixed period of app access are sold at recurring prices. Subscription-based pricing is a common monetization strategy for mobile apps, but in the context of online dating, different subscription period lengths can lead to very different outcomes for the platform and its users. In this study we analyze the profit and welfare trade-offs associated with different length subscription pricing strategies for online dating platforms.
We develop a novel model for the operation of an online dating platform. By analyzing our model we find that short period pricing always achieves at least $\frac \approx$ 26.9\% of the profit of the optimal policy. However when the marginal cost is low, longer period pricing yields optimal revenue and higher welfare. Longer period pricing also provably coordinates incentives between users and platforms, allowing the platform to incorporate user preference information in a way that leads to lower prices.
Our model yields valuable insights for market designers seeking to understand and improve the operations of online dating platforms. Our findings indicate that short period pricing is robust, and thus may be an effective pricing strategy when underlying market parameters are uncertain, or when the marginal cost of operating the platform is non-negligible. However when marginal costs are negligible (as is often the case), we find that a switch to longer period pricing can yield more revenue and higher user welfare while aligning incentives between the platform and its users.
Keywords: online dating, matchmaking, subscription, contract, pricing
JEL Classification: D02, D40
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