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Stanford's 'Marriage Pact' Is Actually A Great Way To Understand Economic Markets

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The marriage market is a market. There just aren't any prices. And when you can't put a price tag on something like love, economists have found ways to match people, as Sarah Gonzalez with our Planet Money podcast reports.

SARAH GONZALEZ, BYLINE: Every year around finals week, undergrads at Stanford all wait for this one email. It will have the name of their perfect match, the person on campus they should one day marry. If you live in the dorms, you all wait for this email to come out together.

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ALDEN O'RAFFERTY: Someone goes like, oh, I got a football player. So I run down to that side of the hall, and I'm like, oh, my gosh. Let me look. Let me look. And we're Googling them. But then, I'm still refreshing.

GONZALEZ: This is Alden O'Rafferty. This matching thing is called the Marriage Pact. There aren't any pictures, no profile. You don't get a bunch of matches to scroll past. You get just one match, one name. At 11:25 p.m. on November 20, Alden O'Rafferty gets her match.

O'RAFFERTY: First thing I do, obviously, is I look her up on Instagram. She's gorgeous, beautiful, glowing.

GONZALEZ: And her match, Kyra Dorado Teigen, makes the first move.

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KYRA DORADO TEIGEN: Oh, my gosh. I actually sent her really cringey DM...

O'RAFFERTY: It's horrible.

DORADO TEIGEN: ...That we just don't need to look into what it said (laughter) because it was so embarrassing.

O'RAFFERTY: No, we do. I think that would be helpful.

GONZALEZ: (Laughter).

DORADO TEIGEN: It starts with the word heyo, which is like - I just - oh, God. Anyway...

GONZALEZ: Three years before they got matched, this undergrad at Stanford, Liam McGregor, was in an econ class learning about all types of markets.

LIAM MCGREGOR: I was a young little sophomore. And yeah, we learned all about auctions and matching markets.

GONZALEZ: Now, in a market where there's a price tag on something, economists don't really get involved. They know the market will figure out the best price. But what do you do in markets where there are no prices at all, like the market for human organs? You cannot charge for human organs. In 1962, economist David Gale and Lloyd Shapley said the answer was a matching market.

They say picture an island with three men and three women. Everyone is going to get matched, so everyone should rank their preferences. So let's say my top choice is guy number two, but he doesn't rank me back. So I get my second choice, which is kind of a bummer because, you know, he's my second choice, but I also know that there's no one else on the island that I prefer who also prefers me back. This is the best I can do.

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MCGREGOR: And so a stable match is one where people have gotten the best they can get.

GONZALEZ: This metaphorical island gave us what is called the Gale-Shapley algorithm. It's been used to match people to organs, doctors to residency programs. But when you do have to rank things, you can start to strategize a little. Like, maybe you want to get into the best medical residency program, but you don't think you'll get in, so you just leave it off your list completely. You don't actually list your real preferences.

So Liam McGregor decides to reimagine the algorithm for a class assignment. He says no more ranking. Instead, he comes up with 50 questions where there's no real incentive to lie. So no, like, how tall are you kind of questions.

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MCGREGOR: So like, would you keep a gun in the house or is it OK for your child to be gay?

GONZALEZ: It wasn't groundbreaking stuff, but his professor, Nobel Prize-winning economist Paul Milgrom, says it was different from what economic theory on matching had looked at.

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PAUL MILGROM: Yeah, these are not economic ideas. These are things that more normally would have come up in psychology or sociology. And it was wonderful. It was exciting.

GONZALEZ: As for Alden O'Rafferty and Kyra Dorado Teigen, after they got matched, they decided to meet up for a picnic on campus.

O'RAFFERTY: I'm like, I'm going to wow her.

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DORADO TEIGEN: There's, like, little thermoses, and there's Pop-Tarts, and there is little squeezy applesauces. Oh, my God.

O'RAFFERTY: You're telling it wrong.

DORADO TEIGEN: I'm not telling it wrong.

O'RAFFERTY: You're telling it wrong.

DORADO TEIGEN: OK, fine. You can tell it.

GONZALEZ: They say they did fall for each other, just in a platonic way. But they can see themselves fulfilling the pact one day.

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DORADO TEIGEN: We've talked about our wedding. We're getting married outside. There's going to be lots of trees. There's going to be lights in the trees.

GONZALEZ: The Marriage Pact is now at dozens of colleges and universities. Sarah Gonzalez, NPR News. Transcript provided by NPR, Copyright NPR.