Bets As Loyalty Signals

Why do men give women engagement rings? A standard story is that a ring shows commitment; by paying a cost that one would lose if the marriage fails, one shows that one places a high value on the marriage.

However, as a signal the ring has two problems. On the one hand, if the ring is easy to sell for its purchase price, then it detracts from the woman’s signal of the value she places on the marriage. Accepting a ring makes her look mercenary. On the other hand, if the ring can’t be sold for near its purchase price, and if the woman values the ring itself at less than its price, then the couple destroys value in order to allow the signal.

These are common problems with loyalty signals – either value is destroyed, or stronger signals on one side weakens signals from other sides. Value-destroying loyalty signals are very common in couples, clubs, churches, firms, professions, and nations. For example, we might give up poker nights for a spouse, pork food for a religion, casual clothes to be a manager, or old-world customs for a new nation.

A few days ago I had an idea for a more efficient loyalty signal. Imagine that when he was twenty a man made a $5000 bet that he would never marry before the age of fifty. Then when he is thirty-five and wants to marry, he can send a strong signal of his desire to marry just by his willingness to lose this bet. Since the bet is lost to a third party, it doesn’t hinder the bride’s ability to signal her loyalty. And assuming the bet is made at fair odds, the lost bets are on average paid to versions of this man in alternative scenarios where he doesn’t marry by fifty. So he retains the value, which is not destroyed.

Today this approach probably suffers from being weird, so doing this would also send an unwelcome signal of weirdness. But it is only a signal of one’s weirdness when one made the bet – maybe one can credibly claim to be less weird later when marrying. And the bet would remain potent as a signal of devotion.

There are many related applications. For example, a young person who bet that they would never join a religion might later credibly signal their devotion to that religion, and perhaps avoid having to eat and dress funny to show such devotion. Also, someone who bet that they would never change countries might signal their loyalty when they moved to a new nation. To let my future self signal his devotion to his political party, perhaps I should bet today that I’ll never join a political party. Do I have any takers?

Added 20July: Of course the need to lose a bet to get married would discourage some from getting married. But the same harm happens for any expectation of needing to send a loyalty signal if one gets married. This effect isn’t particular to bets as loyalty signals; it happens for all kinds of loyalty signals.

Mechanically one way to implement marriage bets as loyalty signals would be for parents to buy their sons male spinster insurance, which pays money to the son when he is fifty if he never marries, and otherwise gives him a nice visible cheap pin/brooch when he gets married. His new wife can wear the pin to brag about his devotion. The pin might be color coded to indicate how much money he sacrificed.

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  • Joshua Brulé

    I suspect a potential problem is that these signals are not just expressing loyalty but a willingness to conform.

    The $5000 engagement ring isn’t just a statement of “I am willing to spend $5000 to signal my devotion”; it’s a statement “I am willing to spend $5000 in manner specified by tradition”.

    You could probably compensate for the nonconformity by increasing the size of the bet but most people seem to value conformity pretty highly. I’m not sure how much larger the bet would have to be (or if such a conversion even makes sense).

    • http://www.gwern.net/ gwern

      > it’s a statement “I am willing to spend $5000 in manner specified by tradition”.

      A tradition apparently manufactured relatively recently by advertising. I guess that’s actually a point in favor of the tradition idea and against the precommitment theory – the need for precommitment in marriage would presumably always have existed, and so diamond rings shouldn’t be of such recent vintage (or have very similar predecessors).

      • Joshua Brulé

        Perceived tradition, maybe? I haven’t thought this through, but I think a majority of people believing it’s an old tradition is just a good as an actually old tradition.

      • Tyrrell_McAllister

        Until recently, just getting married was already a sign of precommitment, because divorce was socially expensive.

    • http://overcomingbias.com RobinHanson

      People have needs both to signal conformity and to signal loyalty. Signaling conformity is easy in most any equilibrium; just do what everyone’s been doing. The more interesting question is how well different equilibria do at signaling loyalty while not destroying value.

  • anon

    A generalization of this idea: sell the right to receive the proceeds of whatever value-shedding signals you will make. Then you can decide to, say, bundle marriage (or joining-a-party) and shedding $5000, but you can also shed more or less money, which means you’ll be able to send the right signal in more scenarios.

    One second-best solutiin which is not-so-weird and works well in practice is to precommit to donate value to some associate you care about or perhaps to a charitable organization, chosen either in advance or for some general value like effectiveness. This also mostly helps you in states of nature where you _don’t_ have to send the signal; essentially, you can think of yourself as being more altruistic in expectation while not paying the associated costs. I can’t think of other ideas that would similarly save on the costs of complex individual contracting, but perhaps others can.

  • David C

    The third party would have very little information on the man’s willingness to marry so would have to give very poor odds to prevent being gamed. The average man would lose a great deal. Also, the ring has a ton of interpersonal value. Nobody is ever going to cry over the joy of hearing about a bet.

    • anon

      > The third party would have very little information …

      This is a problem, yes. Essentially, you might need to offer very good odds in order to attract speculators, and then only people who are unlikely to marry might find the bet worthwhile, with others being shut out of the market.

      > Also, the ring has a ton of interpersonal value.

      Not a problem. You can easily certify that a bet has occurred or been settled, and print a nice-looking physical certificate. Many financial assets used to work like this, before advances in technology made it possible to replace these physical copies with de-materialized, virtual versions stored in computers.

      • Joshua Brulé

        Can’t carry the certificate with you though. The ring is small enough be worn constantly.

      • http://overcomingbias.com RobinHanson

        Certificates can be all sorts of sizes. There might even be a visible broach that represents the loss of a loyalty signal bet.

      • sp

        brooch

      • RobS79

        Perhaps it could be made of gold and inset with a diamond?

    • http://overcomingbias.com RobinHanson

      I don’t see why adverse selection should be much more of a problem here than with life or health insurance.

      • Telnar

        The problem is that this wager doesn’t provide the sort or risk reduction that insurance normally does by paying off in states of the world where the payment would be especially utility increasing. Without that, it will be harder to find odds which both parties are willing to take.

      • http://overcomingbias.com RobinHanson

        ?! Most sports bets don’t insure those who bet, yet people can find odds just fine.

      • Telnar

        Sports betting, though, seems to be the most obvious example of a class of bets that people make for entertainment. Someone with more experience betting in less regulated environments like the UK could speak to this better, but I suspect that the sort of wagers which are generally offered by bookmakers relate to public events that the gamblers enjoy following even without the wager.

        I guess the question is whether enough people would find negative expectation bets on their future decisions desirable to yield a profitable market for the bookmakers. Without entertainment as a motive, they might need to more explicitly embrace signaling as a reason, which could pose difficulties since signaling often works better from the shadows.

  • http://www.boundsouth.org Isaiah Berg

    I don’t follow the “value-destroying loyalty signals” premise. While certainly the monetary value of a ring depreciates as soon as the starstruck couple walks out of the jeweler, I would argue this isn’t “destruction” so much as a purchase of a valuable loyalty signal – of non-monetary value specifically.

    Perhaps this is just semantics, and you wanted to focus on the inefficiency of destroying monetary value. However I think that is a very impoverished view of “value”.

  • Omegaile

    The problem with bets that you have some control over the outcome, is that, the moment you make the bet, you change your behavior in the direction of winning the bet.

    In the example, the guy would avoid marriage in some limit situations (such as he’s 48), in order to avoid losing the bet.

    This itself is already a behavior restriction. That would be situations where he would be better off marrying, that he won’t because of the bet. So it may not be a financial sacrifice, but it is a freedom sacrifice.

    • http://overcomingbias.com RobinHanson

      But any expectation of having to send a loyalty signal will discourage creating the relation that might need to be signaled. It isn’t particular to this kind of loyalty signal.

  • http://bur.sk/en Viliam Búr

    I doubt that rationally invented schemes for signalling without destroying value would actually work on the gut level. It seems to me as if we had some instinct telling us that unless the value was visibly destroyed, there is probably some kind of cheating.

    As an example: Let’s say that I make a deal with my friend, that any time any of us can pretend to have made a bet about anything with the other one in the past. If someone loses this imaginary bet, they will pretend to give money to the other, and the other will pretend to take the money (however, no real money will change hands: that’s the point of the deal). For the sake of simplicity, let’s ignore the technical details such as paying tax for winning the bet, etc. Let’s assume that all the transaction costs are paid by the person who initiates this fake bet.

  • lump1

    Signals like engagement rings and wedding feasts are value-destroying, but not all commitment signals have to be. Instead of presenting a ring, the husband-to-be could present special joint-access investment fund. I’m picturing that an investment firm would offer a category of engagement/nuptual funds with terms tailored to the uncertainty of engagement proposals, that come with symbolic bands that look different based on the size of the fund. The fund would carry a substantial penalty if the principal is withdrawn (automatic if the engagement doesn’t lead to marriage, or the marriage ends, or either partner decides to end the fund), but it could yield a higher-than-market annual return for this reason. In effect, the bank makes a yearly bet that your marriage will fail, and if it doesn’t, the couple gets a payout. Parents and well-wishers could pay into the nuptial fund if they want to exercise pressure on the couple to stay together, or simply signal that they believe in them and bless their union. The terms would be such that banks would lose money on stable marriages, but make it all back with extra on dissolved marriages. After 20 years, a portion of the nuptial fund principal would be transferable without penalty to a nuptial fund for children or grandchildren, the equivalent of re-gifting family jewels. Wouldn’t this be an interesting financial/social instrument?

    • http://overcomingbias.com RobinHanson

      You suggest that the couple bet together that they won’t break up, to create a cost of breaking up and signal their intention not to. That is not quite the same thing as signaling a strong desire to marry.

      • lump1

        The signal you want isn’t just “I want to marry you” but something like “I want to marry you and I’m committed to making it work”. Adding weight to the proposal by unilaterally making a down payment on a house or buying the nuptial fund would do both, wouldn’t it? I don’t see how a value-destroying ring does more.

  • IMASBA

    1) The ring does signal sacrifice: sure it can be traded back for its value but not while the marriage lasts. It represents a lot of wealth that is purposely locked away at a time when most people are relatively cash-strapped.

    2) What’s with the over-the-top farmer attitudes about women? Your proposals seem to assume every woman is a predatory golddigger that has to be bought like a piece of cattle. Could the new sacrifial schemes at least be unisex in a time when many women are educated and wealthy themselves?

    • http://overcomingbias.com RobinHanson

      The tradition is that men give women engagement rings, not vice versa. I address that tradition. My suggestion can be done symmetrically, as both bride and groom could bet that they won’t marry.

      • IMASBA

        Right, so I propose that while we’re improving traditions we also improve the part where commitment tokens are a one-way street (from the dark times when our farmer ancestors really did trade women like cattle).

        One more thought: the token that replaces the ring must be instantly recognizable to everyone as valuabe. If you need a MBA to recognize the value of the token without someone explaining it to you than that token does not work for society. A bet against marrying would work (with the proceeds of a lost bet going to charity or being locked away), buying complicated futures would not work.

  • http://juridicalcoherence.blogspot.com/ Stephen Diamond

    To the extent bets are signals of loyalty, the foundation of prediction markets is undermined.

  • spandrell

    You seem to forget that betting is regarded as a bad thing in most societies. Gambling usually leads to bad outcomes. And women don’t bet.

    You just don’t mix gambling with sacred things such as love. It’s bad form.

    • Tyrrell_McAllister

      Betting so-called is regarded as a bad thing. But buying insurance is technically betting, and insurance is regarded as a signal of responsibility.

      • Adam

        Insurance is a risk-averse form of betting, whereas gambling is (at least usually perceived as) risk-loving. Risk-aversion is a large part of responsibility

      • Tyrrell_McAllister

        Then the question would seem to be whether failure-to-get-married is seen as a bad thing, in the sense that hedging against it would signal risk aversion.

  • Adam

    I think that you might be missing the point that having an expensive wedding ring increases the status of both husband and wife, (and women at least stereotypically directly value wearing nice jewelry) and so there is not as much destroyed value in the standard approach as you claim.

  • Kevin P

    The “bride price” tradition probably fulfilled a similar goal. The money is paid to the parents, so the value to the wife herself is much lower than the original sum, but value isn’t destroyed in the long term because of the expected payback from the couple’s own daughters a couple of decades later. A gender-symmetrical version of that tradition (to avoid the icky trading-women-like-cattle connotations discussed by earlier posters, as well as to make it more compatible with homosexual couples) would serve the purpose of the betting system you described.

    Unlikely to happen though, because the chicken/egg problem is even bigger than the weirdness problem in the betting system – it’s only viable if it’s an established tradition, but wouldn’t become established until it’s viable. The most plausible way I can think is if a culture that still has a bride price tradition (China?) moves to a gender-symmetrical version then gains enough soft power that its marriage culture is adopted abroad, but at the moment it looks like that’s going in the opposite direction.