Dear Economist

Do I show my hand and risk my home?

Dear Economist,
I am a third-year university student and I share a flat with a student on the same course as me from the year below. We are good friends, but I, alas, want us to be more than that. The risks of my confessing my feelings are quite high. If it works out, I have a girlfriend; if it doesn’t, I’ll end up homeless, looking for an (almost prohibitively expensive one-person) apartment, having lost my best friend. If I keep her in the dark I’m guaranteed to have a roof over my head for the two remaining years. Can economics provide an answer to my dilemma?
Unnamed student, London

Dear student,

The cost-benefit analysis here is deceptive, so let me walk you through it. Your mistake has been to frame your dilemma as a static choice problem: either you confess now and take your chances, or you never confess.

That is wrong. There is, dare I say it, a third way. Simply wait and see whether anything is clearer tomorrow, or the next day, or the day after that.

In technical terms, you have an option on making a pass at this lucky lady, and you will continue to have that option until either you actually do so, or until either you or she falls for someone else. The option is valuable and should not be exercised lightly, and thus expended. Option valuation models suggest that you should make your move only if you are absolutely sure (you clearly are not) or if other suitors are circling and your option is about to vanish anyway.

Even in the latter circumstance, you shouldn’t make your move if you feel the odds are against you. I suspect they are. The chances are that this young woman knows exactly how you feel. Since she has done nothing to encourage you, I expect she is praying you’ll keep your feelings to yourself.

Also published at ft.com.

25th of April, 2009Dear Economist • Comments off