- 14 Jun 2017
- Working Paper Summaries
Minimizing Justified Envy in School Choice: The Design of New Orleans' OneApp
TCC (Top Trading Cycles) and DA (deferred acceptance) are the two main algorithms for priority-based resource allocation. In 2012, the New Orleans school system tried to use TCC for school assignments, but dropped it after one year. The authors of this paper compared data from New Orleans and Boston in order to review designs and algorithms for better school assignment systems.
- 16 Sep 2015
- Research & Ideas
Can Applied Economics Save Homeless Puppies?
At a startup she co-founded while pursuing a doctorate in economics, Christine L. Exley is rescuing dogs with principles of market design. Open for comment; 0 Comments.
- 27 Jan 2015
- Working Paper Summaries
College Admissions as Non-Price Competition: The Case of South Korea
College admissions is a matching market—applicants cannot simply choose which college to attend, they must be admitted. From the perspective of colleges competing for top applicants, how can these institutions make the best strategic decisions and increase their own desirability? South Korea offers an ideal case study for analyzing efficiency in college admissions matching because the national government sets the rules in centralized fashion and South Korea has made several important changes in the rules in 1994. The authors develop a model to study the incentives for colleges before and after the reforms, and compare the predictions of the model to stylized facts about the behavior of South Korean colleges given each set of rules. The authors then assess the success of the reforms before and after these changes to admissions rules. Findings show that the 1994 South Korean college admission reforms increased the efficiency of the assignment process in two ways. First, these reforms reduced congestion, ensuring that all students could apply to at least three highly-ranked colleges (once in early admissions and then on two different dates in regular admissions). Second, this reform provided new information to colleges, enabling them to promote specialized matches in their regular admission decisions. Closed for comment; 0 Comments.
- 10 Sep 2014
- Working Paper Summaries
Don’t Take ‘No’ for an Answer: An Experiment with Actual Organ Donor Registrations
More than 10,000 people in the United States die each year while waiting for an organ transplant. Policymakers and some economists who have tried to increase the rates of organ transplantation have focused on changing the registration question—usually asked when people renew their driver's license—from a simple opt-in to one in which potential donors have the opportunity to make an active "yes" or "no " choice. The authors provide the first concrete evidence of whether active choice affects registration decisions about organ donation. Somewhat surprisingly, the results suggest that not only does active choice not increase registration, it may decrease the transplantation rate by suggesting to next-of-kin that unregistered donors actively chose not to donate. At the same time, however, experimental results suggest other ways to increase the rates of organ donor registration. For example, people are 22 times more likely to add themselves to the registry than remove themselves from the registry, even though they had been asked previously about organ donor registration. This suggests the effectiveness of making a repeated appeal for organ donor registration. In addition, giving people more information about organ donation increases registration rates. Key concepts include: Giving people the opportunity to make an active choice about donation rather than a simple opt-in does not increase, and may decrease, organ donor registration rates. Asking more than once for organ donation increases the number of donors. We shouldn't assume that "no" is a final answer (i.e., don't take no for an answer). People who are registered donors are unlikely to remove themselves from the registry when given the opportunity to do so Giving people information about the benefits of donation, namely providing a list of organs that might be donated, increases the likelihood of registration. Increasing the number of individuals who register as deceased donors is just one way of addressing the need for transplantable organs. Kidney exchange, in which incompatible patient-donor pairs are matched, has facilitated transplantation of kidneys from living donors. Closed for comment; 0 Comments.
- 09 Aug 2012
- Working Paper Summaries
The Need for (Long) Chains in Kidney Exchange
It is illegal in the U.S. and in most of the world to buy or sell organs for transplantation. Kidney exchange arises because a healthy person has two kidneys and can donate one to a person in need of a transplant. But a donor and his or her intended recipient may be incompatible. An incompatible patient-donor pair can exchange with another pair, or with more than one other pair, in a cycle of exchanges among patient-donor pairs that allows each patient to receive a kidney from a compatible donor. In addition, sometimes exchange can be initiated by an altruistic donor who does not designate a particular intended patient, and in that case a chain of exchanges need not form a closed cycle. This paper seeks to understand why such longer chains have become increasingly important in practical kidney exchange. The answer has to do with the growing percentage of patients for whom finding a compatible donor is difficult. These "highly sensitized" patients are those for whom finding a transplantable kidney is difficult, even from a donor with the same blood type, because of tissue-type incompatibilities. This paper shows that highly sensitized patients are the ones to benefit from longer cycles and chains, and that this does not harm low-sensitized patients. Key concepts include: As long as there is such a high percentage of highly sensitized patients, long chains will help by increasing the number of these patients who can receive transplants, and each altruistic donor can have a big effect. Closed for comment; 0 Comments.
- 05 Dec 2011
- Research & Ideas
It’s Alive! Business Scholars Turn to Experimental Research
Business researchers are turning increasingly to experiments in the lab and field to unlock the secrets of what motivates CEOs, consumers, and policymakers. Key concepts include: Interest in experimental research may have been ignited by prominent behavioral economist Danny Kahneman, who won the Nobel Prize in Economics in 2002, and by journalist Malcolm Gladwell, author of The Tipping Point and Blink. Researchers use field and lab experiments to better understand the logic of real-world decisions, which sometimes fly in the face of established economic theory. Experimental research can be considered a leg on a three-legged stool that also includes field data and theory. While agreeing to be part of a field experiment can be time-consuming for a company, the results can be invaluable—and more cost-effective than paying a market research firm or a consultant. Closed for comment; 0 Comments.
- 24 Mar 2011
- Working Paper Summaries
Individual Rationality and Participation in Large Scale, Multi-Hospital Kidney Exchanges
As kidney exchange moves from local networks to a national level, a new set of problems arises. One central issue, for example, is how individual hospitals can be motivated to participate. This paper by Itai Ashlagi (Sloan School of Management, MIT) and Alvin E. Roth (Harvard Business School) provides a theoretical framework to study and overcome the kinds of problems that can be anticipated. Key concepts include: The paper addresses the growing problem of providing hospitals with incentives to participate fully in a national kidney exchange, in order to achieve the gains that exchange on a large scale makes possible. Hospitals might be reluctant to enter a national exchange if it means they would have to give up kidneys to other institutions that could be used in their own patients. In large markets it is possible to redesign the matching mechanisms to guarantee individually rational allocations to hospitals at very modest cost in terms of "lost transplants." If care is taken in how kidney exchange mechanisms are organized, the problems of participation may be less troubling in large exchange programs than they are starting to be in multi-hospital exchanges as presently organized. Closed for comment; 0 Comments.
- 17 Mar 2011
- Working Paper Summaries
Marketplace Institutions Related to the Timing of Transactions
Certain markets face the problem of "unraveling," in which competition for good talent leads a firm to make job offers earlier and earlier, without sufficient knowledge about any given applicant—and in which applicants are forced to decide whether to accept a job before they really know much about working for that firm. Harvard Business School professor Alvin E. Roth discusses how this issue affects the labor markets for new lawyers and gastroenterology fellows, as well as the market for postseason college football bowls. Key concepts include: The market for postseason college bowls is one in which the negative effects of unraveling can be easily quantified: If two teams are matched to play a postseason game before they have finished the regular season, it's possible that one or both will lose some of their remaining regular season games, making the postseason bowl game less attractive to potential TV viewers than it would have been if it had featured more successful teams. Efforts to stop the problem of unraveling in the market for law graduates have generally been unsuccessful, as have attempts to establish uniform dates for recruiting and hiring. This proves that unraveling is a problem even in markets such as law, where salaries are easily adjustable. On the other hand, the market for new medical residents has faced little unraveling ever since that market introduced a stable resident matching system. This negates the idea that rigid pricing is the cause of unraveling, because the medical field generally pays its new residents uniformly across the board. Closed for comment; 0 Comments.
- 08 Nov 2010
- Research & Ideas
How to Fix a Broken Marketplace
Alvin E. Roth was a co-winner of the Nobel Prize in Economic Science this week for his Harvard Business School research into market design and matching theory. This article explores his research. Key concepts include: Successful marketplaces must be "thick, uncongested, and safe." Sufficient "thickness" means there are enough participants in the market to make it thrive. "Congestion" is what can happen when markets get too thick too fast: there are heaps of potential players, but not enough time for transactions to be made, accepted, or rejected effectively. "Safety" refers to an environment in which all parties feel secure enough to make decisions based on their best interests, rather than attempts to game a flawed system. Closed for comment; 0 Comments.
- 26 May 2010
- Working Paper Summaries
Unraveling Results from Comparable Demand and Supply: An Experimental Investigation
In many professional labor markets, most entry-level hires begin work at around the same time: for example, soon after graduating from college or graduate or professional school. Despite a common start time, offers can be made and contracts can be signed at any time prior to the start of employment, sometimes well over a year before employment will begin. "Unraveling" happens in markets in which competition for the elite firms and workers is fierce, but the quality of workers may not be reliably revealed until after a good deal of hiring has already been completed. Thus unraveling is sometimes a cause of market failure, particularly when contracts come to be determined before critical information is available. In this paper Muriel Niederle of Stanford, Alvin E. Roth of HBS, and M. Utku Ünver of Boston College consider conditions related to supply and demand that tend to facilitate or mitigate unraveling. Key concepts include: It is commonly suggested by economists and lay participants in markets that unraveling results from competition related to an imbalance of demand and supply. Unraveling can have many causes, because markets are multidimensional and time is only one-dimensional (and so transactions can only move in two directions in time, earlier or later). So there can be many different reasons that make it advantageous to make transactions earlier. When looking at a labor market, it is not uncommon for participants on both sides of the market to be nervous about their prospects, and it can be difficult to be sure which is the short side of the market. Even in a market with more applicants than positions there may be a shortage of the most highly qualified applicants. Attempts to prevent or reverse unraveling are often a source of new market design in the form of new rules or market institutions. Closed for comment; 0 Comments.
- 19 May 2010
- Working Paper Summaries
The Job Market for New Economists: A Market Design Perspective
How should the most appropriate employers and job candidates find each other? Newly minted economists typically send applications to an average of 80 potential employers, and as a result, many employers receive hundreds of applications. It is extremely time-consuming to sort through all the applications, and as the process unfolds, there is a risk of coordination failure, in which employers and candidates who would be well-suited do not manage to create a match. In this paper, HBS professors Peter A. Coles and Alvin E. Roth and colleagues provide an overview of the market for new PhD economists and describe new mechanisms to improve the matching process. They conclude by discussing the emergence of platforms for transmitting job market information, and other design issues that may arise in the market for new economists. Key concepts include: Practical market design is often a response to particular problems. A new market design often leads the way to developing new knowledge. Two new mechanisms have facilitated matches. The first, a signaling service, allows job candidates to express interest to a limited number to potential employers prior to interviews at association meetings. The second mechanism, a web-based "scramble," reduces search costs and "thickens" the late part of the job market for candidates and employers still seeking a match. Closed for comment; 0 Comments.
- 29 Sep 2008
- Research & Ideas
How Economics May Lead to Better Football Games
When economists watch football games they see more than flying pigskin and stadiums overflowing with fans. In the case of U.S. college football, Harvard Business School professor Alvin E. Roth along with Guillaume R. Fréchette and M. Utku Ünver studied the timing of team selection for championship bowls. What they found: Good teams are much better matched up than they used to be, and there are implications beyond sports. Q&A with Al Roth. Key concepts include: Until 1992, college teams were matched for bowl games before the regular football season had ended. Thanks to tweaks in the design of postseason play, larger numbers of teams can be potentially matched after their final rankings are known. The total viewership of college bowls has increased. Roth et al.'s paper may provide the first direct evidence and measurement of the inefficiency due to early transaction times in a naturally occurring market. Closed for comment; 0 Comments.
- 29 Aug 2008
- Working Paper Summaries
Unraveling Yields Inefficient Matchings: Evidence from Post-Season College Football Bowls
Many market institutions have evolved to coordinate the timing of transactions and to prevent them from taking place too early or at uncoordinated times. In the case of post-season college football games, called "bowls," during the early 1990s the determination of which teams would play in which bowls was often made with several games still remaining to be played in the regular season. Practically speaking, this meant that the teams with the best end-of-season records might not play one another, because at the time the matchings were determined it wasn't yet known which teams these would be. Over the last decade, however, this market has undergone a number of reorganizations that have delayed this matching decision until the end of the regular season. For this working paper, the authors used Nielsen rating data on television viewership and the AP sportswriters' poll of team rankings to show that, by matching later, the chance of matching the best teams has increased, and the result is an increase in television viewership. Key concepts include: By matching bowl games later, the quality of the matched teams has improved, the likelihood of a championship game has increased, and the television viewership of all bowls in the late-matching consortia has increased. This paper may provide the first direct evidence and measurement of the inefficiency due to early transaction times in a naturally occurring market. Closed for comment; 0 Comments.
- 30 Jul 2007
- Research & Ideas
Repugnant Markets and How They Get That Way
Repugnance is different in different places and at different times, says Harvard economist Alvin E. Roth in this Q&A. As someone who designs and builds new markets, he marvels at how society decides whether a transaction is "good" or "bad"—even when such transactions are very much alike. Key concepts include: "Repugnant transactions" are transactions that some people don't want other people to engage in. From the point of view of economists, the phenomenon of repugnant transactions can be a serious constraint on markets and market design. When a market is illegal, the versions of it that arise can be quite dangerous. It is difficult to compare how markets operate when they're illegal with what it would be like if they could operate legally. Closed for comment; 0 Comments.
- 24 May 2007
- Working Paper Summaries
Repugnance as a Constraint on Markets
While some kinds of transactions are repugnant at certain times and places, they are considered perfectly acceptable in other situations. This essay examines a wide range of examples, including the buying and selling of kidneys for transplantation. Repugnance has important consequences for the transactions and markets we see. Key concepts include: Distaste for certain kinds of transactions can be a real constraint on markets and how they are designed, every bit as real as the constraints imposed by technology or the requirements of incentives and efficiency. Discussion is essential. Just as economists see very few tradeoffs as taboo, non-economists often decline to discuss tradeoffs at all, preferring to focus on the repugnance of transactions like organ sales. The laws against buying or selling kidneys reflect a reasonably widespread repugnance, making it difficult for arguments that focus only on the gains from trade to make headway in changing these laws. But that does not mean that gains from exchange can't be realized. Behavioral economics has been concerned mostly with how individuals make choices. But attitudes about repugnance shape whole markets, and therefore shape what choices people face, and so may be an important way that "behavioral" considerations affect the economy. Closed for comment; 0 Comments.
- 22 May 2007
- Working Paper Summaries
Strategy-Proofness versus Efficiency in Matching with Indifferences: Redesigning the NYC High School Match
One of the goals of school matching systems is to limit the extent to which students and parents feel it necessary to "game the system" to be accepted at a favored school. Several years ago, the authors of this paper assisted the New York City Department of Education in redesigning the way it matched over 90,000 students entering public high schools each year. The situation in New York City is a hybrid: Some schools actively rank potential students, others have no preferences, and still others fall in between. This paper concentrates on the welfare considerations and incentives that arise in school choice due to the fact that many students are regarded by schools as equivalent. The research develops and expands on economic theory demanded by the design of school choice mechanisms. Key concepts include: As economists are more often asked to design practical markets and allocation mechanisms, they will increasingly navigate two-way feedback between theory and design. The paper raises new theoretical questions. It would be helpful to have answers before the next major design or redesign of school matching systems. Closed for comment; 0 Comments.
- 27 Feb 2006
- Research & Ideas
When Rights of First Refusal Are a Bad Deal
Contracts that include a right of first refusal usually benefit the holder of that right. But not always. New research by professor Alvin E. Roth and colleague Brit Grosskopf explains when it's wise to say no. Closed for comment; 0 Comments.
- 28 Feb 2005
- Research & Ideas
Amazon, eBay and the Bidding Wars
"Sniping" is a popular way of winning a bid in the world of online auctions. But how far can it change the playing field? HBS professor Alvin Roth takes a look at how bidding rules change the way the game is played. Closed for comment; 0 Comments.
Kidney Exchange: An Operations Perspective
Kidney exchange has become a standard form of transplantation in the United States and a few other countries in part because of exchange process improvements. However, much more needs to be done: There are still many more patients in need of transplants than can be saved.