Relationship Prisoner's Dilemma — HIMYM

I was recently watching a TV show called How I Met Your Mother. In the show, there are two characters named Kevin and Robin who just recently started dating. In one episode, they are hanging out with their friends who decide to have a pretty wild night. When the friends suggest that they all go to a crazy party that night, neither Kevin nor Robin want to go (as indicated by their respective internal monologues) because they are tired. However, they both lie and say that they do want to go. I wondered why they both did this until I realized that it was a case of a Prisoner's Dilemma.

During their respective internal monologues, both of them said that they felt the need to lie and say yes to going to the party because when someone is in the early stages of a romantic relationship, he or she wants their partner to think that they are exciting and always down to have fun so the relationship doesn't become boring. While this is just a TV show, this reasoning seemed pretty realistic since boredom is one of the worst things for a relationship. Both Robin and Kevin recognize that if they lie and say they want to go to the crazy party, they will come off as adventurous and fun to the other – regardless of whether the other is honest or lies. Even though they both are worse off if they both lie, the utility each of them gets from their partner thinking they are exciting incentivizes them to lie. Therefore, lying is the dominant strategy for both of them. However, both of them engaging in their dominant strategies of lying results in a Pareto inefficient allocation of resources (i.e. their time, energy, etc.) since they both would be better off if each of them were honest since both truly just want to stay home and conserve their energy.

Since Kevin and Robin are the only ones aware of the situation, it may be difficult to find a solution. However, if both of them separately told their friend Lily, for example, about how they feel the need to lie instead of being honest, Lily – a third party – could enact some sort of "contract" in which both of them must tell each other the truth about how they don't want to go to the crazy party or else she will reveal an embarrassing secret about each of them to the other. While some may call this "blackmailing", I think of it more as "incentivizing two parties to avoid their dominant strategies in order to arrive at a Pareto optimal outcome". This may sound immoral and unhealthy, but hey – I'm not thinking like a relationship counselor; I'm thinking like an economist!

Industry Plants are Rent Seekers

Industry plants are artists who pretend to have a natural success story but were promoted by industry insiders. This is seen in people such as Lil Nas X (who admitted on twitter to being a plant) who are instantly popular with no explanation. While sometimes just a conspiracy theory or insult, evidence shows many artists are “plants”. I was thinking about this the other day and realized how industry plants are a slight variation on the classic rent seeking model.

When I refer to the music industry, I refer to the 3 major record label companies who control of 80% of the market: Sony BMG, Universal Music Group, and Warner Music Group. With music streaming and advertising, large record labels can easily promote music and garner listens. Without a big label deal, it is almost impossible to overcome this congested market. Thus, a record label deal is equivalent to a tariff or license that gives an artist monopoly power. An obvious example is the artist Billie Eilish. Eilish was offered a deal with Interscope Records (owned by Universal Music Group) when she was very young and her very first song went Platinum. She was promoted by the record company, giving her essentially complete control over her target demographic. Her deal cost her money, but without it she would not have had anywhere near that level of popularity.

With so much competition, new artists sign deals that highly favor the record label: a cost of obtaining monopoly access to the market. To get a deal, artists are constantly . Plants hurt the industry because they crowd out competition and stifle more talented artists. Resources would be better allocated to allow multiple and more talented artists produce their music. A possible solution is regulation requiring record labels to explicitly state when they are paying for advertisements, similar to how political campaigns are regulated. This would make the industry more transparent and encourage independent artists (given the stigmatism around plants). However, for the near future it seems like industry plants and rent seeking is here to stay.

The blue section from 0 to Q_M and from P_E to P_M  represents the total profit that would be gained from monopoly control on a sector of the music market. This isn’t exactly the same as the traditional model because of the nature of the music industry. There isn’t a clear increase in prices, but the important thing is that there is less competition, so revenue and profit are increased. Additionally, it’s not a complete monopoly, but given the vast difference in popularity and revenue, it has many of the same characteristics. The light orange superimposed on top is an estimate of the cost of rent seeking which takes away from that profit. Included in that cost are the excessive royalties paid to the record company in order to receive a record deal in the first place. The yellow triangle represents the deadweight loss that is caused by the resources that are inefficiently allocated towards less talented artists.