Wednesday, September 30, 2009
Swoopo bidders are a bit of a puzzle of the behavioral economics kind: are they like buyers of lottery tickets, who know that they will likely lose but find entertainment value by purchasing the right to dream (see this paper by Emily Oster)? Or are they making mistakes? And if the latter, will demand for this kind of auction dry up? Or will new suckers keep appearing?
But there are other, market level questions we can ask, and I got the beginning of an answer when I did a google search on "swoopo", or another search on "penny auction" . You'll find two things if you click on those searches: there are now a lot of similar auction sites, and there are also plenty of people who are eager to sell you software to set up your own "penny auction," as these sites have come to be known.
(BidRodeo's icon is a man on a bucking bronco, over the motto "Hold on the longest and win!")
What are the questions to which those observations are the beginnings of answers? I guess one is, "is it easy to earn outsized rents by selling to the gullible?". I presume most of the new sites make very little money. Whether they also attract away swoopo's customers or otherwise reduce swoopo's rents remains to be seen.
A new (job market) paper by Edward Augenblick at Stanford suggests that the already-established penny auctions may not disappear in the blink of an eye: Pay-As-You-Go: Theoretical and Empirical Analysis of a New Auction Format
He finds Swoopo to be quite profitable, and the abstract concludes:
"Finally, I attempt to address the long-term prospects of the market for these auctions. Using high frequency auction supply and user data, I estimate the current and optimal supply of auctions for a given number of users. This analysis suggests that the structure of the auction creates barriers to quickly developing a large userbase, allowing the most-established competitor to continue making large profits in the medium-term. This analysis is supported by auction-level data from five competitors. "
HT Eduardo Azevedo and Muriel Niederle
Tuesday, September 29, 2009
Nowhere is this clearer than in the lawsuits being pressed by the Commonwealth of Massachusetts (which was the first U.S. state to recognize same sex marriage) and other parties against the United States, in an attempt to roll back the federal Defense of Marriage Act.
At issue are the rights of married couples. Specifically (because marriage is a protected transaction), spouses are entitled to tax and other benefits. But (because some people find same sex marriage repugnant) the federal law denies same sex spouses married in Massachusetts federal benefits for married couples.
"Because of the law, the plaintiffs said, they were excluded from using federal benefits that opposite-sex couples can obtain, including health insurance programs for federal employees, retirement and survivor benefits under the Social Security Act, and the ability to file joint federal income tax returns."
That quote is from a story ( US lawyers defend letter of gay marriage ban) that emphasizes how this suit puts lawyers in the Obama administration Justice Department in the unusual position of defending the legality of a law that the administration would in fact like to see repealed.
"Government attorneys said in a brief filed yesterday in US District Court that the administration believes the federal Defense of Marriage Act, which bars the federal government from recognizing same-sex marriages, is discriminatory and wants it repealed.
“Consistent with the rule of law, however, the Department of Justice has long followed the practice of defending federal statutes as long as reasonable arguments can be made in support of their constitutionality, even if the department disagrees with a particular statute as a policy matter, as it does here,’’ the attorneys said."
(The MA suit is formally called Commonwealth of Massachusetts v. United States Department of Health and Human Services et al, and an associated suit is Gill et al. v. Office of Personnel Management, and here is the formal complaint, brought by GLAD, the Gay & Lesbian Advocates & Defenders.)
Monday, September 28, 2009
"MAKKAH – Two persons have been arrested for reserving prayer spaces and renting them out to worshippers at Isha and Taraweeh prayer times...“The practice has diminished a lot this year,” Al-Wabil said. “However, we will show no lenience to anyone caught.”All persons who have been arrested for renting out prayer spaces have been foreigners, Al-Wabil said, adding that culprits are identified through a period of surveillance of individual carpets and persons claiming them beginning half an hour before the start of prayers.Sheikh Saleh Bin Fawzan Al-Fawzan of the Board of Senior Ulema and the Permanent Committee for Ifta ruled last week that reserving prayer spaces at the Grand Mosque in Makkah or the Prophet’s Mosque in Madina was “haraam”, or forbidden.“It is forbidden to reserve places in the mosques, unless the person has left for urgent reasons and intends to return soon, as otherwise it is tantamount to taking something by force,” Al-Fawzan told Okaz newspaper on Thursday. “It is also forbidden to rent a reserved place, and the authorities should put a stop to this vice (munkar).”
HT: Anouar El Haji at U. Amsterdam
Sunday, September 27, 2009
"Hugh H. Hurt, a researcher who developed the Head Protection Research Laboratory at the University of Southern California, and author of the Hurt Report, a seminal study of motorcycle crashes, calls the current Snell M2005 standard “a little bit excessive.” "
Thaler thinks organ sales are too widely viewed as repugnant to be politically feasible. And despite the headline, he comes out in favor not of opt in or opt out as defaults, but rather mandated choice, a nudge of the kind he and Cass Sunstein celebrate in their best selling book of that name.
The Illinois system has another advantage. There can be legal conflicts over whether registering intent is enough to qualify you as an organ donor or whether a doctor must still ask your family’s permission. In France, for example, although there is technically a presumed-consent law, in practice doctors still seek relatives’ approval. In Illinois, the First-Person Consent Law, which created this system, makes one’s wishes to be a donor legally binding. Thus, mandated choice may achieve a higher rate of donations than presumed consent, and avoid upsetting those who object to presumed consent for whatever reasons. This is a winning combination.
THE key, however, is to make signup easy, and requiring people to make a choice is just one way to accomplish it. The private sector could help create other simple methods. Here is a challenge to Mr. Jobs: Why not create a Web site — and a free app for the iPhone — that lets people sign up as organ donors in their home states? "
"British victims of the credit crunch are offering to sell their kidneys for £25,000 or more to help pay debts, an investigation by The Sunday Times has revealed.
At least a dozen adverts have appeared on the internet offering kidneys for sale from British “donors”. Five of the sellers corresponded with undercover journalists, who posed as friends and relatives of sick patients to negotiate sales."
"Both men said they wanted to help those in need of kidney transplants at the same time as relieving their financial difficulties. A leading doctor said the phenomenon highlighted the need for a public discussion of the issue of selling organs.
Professor Peter Friend, a former president of the British Transplant Society, said: “The West has outlawed it for all sorts of good reasons, but the result is it goes underground. It is really important to have a debate.” Nearly 7,000 people in the UK are waiting for kidney transplants and 300 died last year while on the waiting list.
Offering to sell an organ in England, Wales and Northern Ireland is an offence under the Human Tissue Act even if the seller is planning to travel to another country for the transplant operation. "
Saturday, September 26, 2009
Various public agencies have gotten involved, e.g. in NY, the New York State Division of Cemeteries exercises general supervision over cemeteries, while the New York State Insurance Department supervises insurance companies. A burial society is both. The Insurance Department's Liquidation Bureau protects consumers who hold policies with failed insurance companies, and its office of Miscellaneous Estates has taken over the administration of some of the burial societies, until their last members are buried.
"Mark G. Peters, who heads the quasi-public Liquidation Bureau...said the government viewed burial societies as a type of insurer. “They may be a historically anachronistic insurance product,” he said, “but we are essentially the only safety net for people still depending on these societies.” "
At a time when the appropriate role of regulators for a variety of markets, including insurance markets, is under new scrutiny, it's reassuring to hear of a fairly unobtrusive regulator stepping up to do the job for which it was designed.
Friday, September 25, 2009
National Letter of Intent for college athletic recruits: A Quick Reference Guide to the NLI
NALP Principles and Standards for hiring by law firms: PART V: GENERAL STANDARDS FOR THE TIMING OF OFFERS AND DECISIONS "Employers offering full-time positions to commence following graduation to candidates not previously employed by them should leave those offers open for at least 45 days following the date of the offer letter or until December 30, whichever comes first. Offers made after December 15 for full-time positions to commence following graduation should remain open for at least two weeks after the date of the offer letter. "
It turns out that this provision needs some enforcement in a recession. The AmLaw Daily reports: S&C vs. Harvard and the Relevance of NALP's 45-Day Rule
"Perhaps nothing epitomizes the anxiety of this recruiting season better than Sullivan & Cromwell's abandoned attempt to bypass a standard, set by NALP, that firms leave offers to students open for up to 45 days. In late July, S&C called several of the nation's top law schools and informed career services personnel at those schools that the firm would not be following the 45-day guideline, according to six sources with direct knowledge of the situation. All six spoke only on the condition that they not be identified publicly. Instead, S&C told the career services personnel, the firm would require prospects to respond yes or no in two weeks."... "S&C backed down quickly and promised to obey the 45-day standard, according to all six sources who spoke to us about the matter. But that doesn't mean the 45-day guideline is set in stone. James Leipold, executive director at NALP, says several firms (none of which he would name) have called the organization asking if they could skip the 45-day rule in some way this season. Several have asked for permission to keep offers open for 45 days or until they collect as many acceptances as they want--whichever comes first. "
My favorite is the April 15 resolution by the Council of Graduate Schools, signed by most universities, which is carefully designed to be fairly self-enforcing:
"Students are under no obligation to respond to offers of financial support prior to April 15; earlier deadlines for acceptance of such offers violate the intent of this Resolution. In those instances in which a student accepts an offer before April 15, and subsequently desires to withdraw that acceptance, the student may submit in writing a resignation of the appointment at any time through April 15. ... It is further agreed by the institutions and organizations subscribing to the above Resolution that a copy of this Resolution should accompany every scholarship, fellowship, traineeship, and assistantship offer."
Note that the incentive to violate the agreement by insisting that applicants respond before April 15 is undercut by the fact that the resolution allows students to accept such offers, and then subsequently reject them if they get a better offer. That is, the resolution effectively de-fuses Exploding offers by making them non-binding.
Thursday, September 24, 2009
In the coming weeks, I'll be making a series of posts on a subject I term Entrepreneurial Market Design, the study of creating for-profit marketplaces. Such marketplaces often require innovations (market rules, information flows, timing adjustments, reputation mechanisms) to resolve longstanding inefficiencies (lack of market thickness, adverse selection, high transaction costs, etc). These innovations can create significant value for market participants, and at the same time offer a promising business model for the entrepreneur.
I've had the opportunity to study many such markets, in the capacity of academic researcher, case author, and advisor to students who are have started market-based businesses. The first set of markets I'll list are those founded or managed by recent HBS students with whom I've interacted. Future posts will go into greater detail on these.
TeachStreet. TeachStreet is a platform for matching students with classes, usually in a non-academic setting. Instructors of classes ranging from foreign language to cooking to SAT prep to belly dancing post listings on TeachStreet.com. Users browse through classes and sign up, and Teachstreet takes a commission for each new student. Julie Sandler, a current HBS student, is currently investigating how to expand to the platform to include children's classes. www.teachstreet.com
RelayRides. Concisely described as a peer-to-peer version of Zipcar. Car owners sign up to make their cars available for rental, naming their own rates and hours. Renters select from available cars. In theory, prices could be lower than in Zipcar and fleet size could be much larger. This looks like a classic two-sided network, but with some intriguing challenges of insurance, monitoring, and adverse selection. The founders are HBS students Shelby Clark and Nabeel Al-Kady. http://www.relayrides.com/check-zip.cgi?zip=21202&x=10&y=16
ClearMechanic. ClearMechanic is a platform to better connect auto mechanics with their customers. In an industry often considered technologically backward and rife with trust problems, ClearMechanic is meant to offer transparency and online accessibility to auto-owners. Using ClearMechanic, customers can go online to see the where their repair is in the work queue, learn about the repair being done, and interact with the repair shop. It also serves a marketplace for complementary products, such as accessories, insurance, repurchase options. The founder and CEO is Brad Simmons, a former student of my MBA class Managing Networked Businesses. www.clearmechanic.com
VigLink. VigLink is a startup that describes itself publicly as “building a unique platform for the real-time optimization of affiliate marketing." The founder, Oliver Roup is a recent HBS graduate and former student of Managing Networked Business. www.viglink.com
Cork'd. Cork'd is a social network for wine lovers. The founder is wine celebrity Gary Vaynerchuk, and the CEO is Lindsay Ronga, a former student in Managing Networked Businesses. Among other goals, Cork'd would like to match users with their favorite wines. www.corkd.com
SaleAwayWithMe. SaleAwayWithMe is a website that offers users customizable notifications about sales from their favorite brands. SaleAwayWithMe differentiates itself from spammy newsletters in that specific brands can be chosen, their sales are consolidated into a single list, and users can set thresholds (e.g. only include the most popular notices, such as sale notices that XX% of recipients click on.) SaleAwayWithMe is in a very early state, and was founded by former HBS student Sumir Meghani. www.saleawaywithme.com
I've recently spoken with all of the founders/managers of these companies, and each is willing to work with students who choose to study the business as part of the class project.
An important 1995 paper in the AER by Rosemarie Nagel (“Unraveling in Guessing Games: An Experimental Study") reported an experiment in which this tension was made very clear. In one form of the game, a large number of people are asked to pick a real number between 0 and 100, and the winner will be the person who picks the number closest to 2/3 of the median of all the numbers chosen.
This game shows off the tension between playing a game with perfectly rational players and playing the same game with a sample of humans, even if you are perfectly rational yourself. If all the players are perfectly rational, no one will ever choose a number other than 0, and this is the only equilibrium. (You can prove it this way: no matter how close the median number chosen is to 100, 2/3 of 100 will be closer to 2/3 of the median than will any higher number, so no rational player will ever choose a number larger than 66.66. So the median number chosen in the world of all perfectly rational players will never be higher than 66.66, and so 2/3 of the median will never be higher than 2/3 of 66.66, and so no rational player will choose a larger number, and so forth: in the world of all rational players, no one chooses any number larger than 0.
But of course, among humans, many people do choose numbers larger than 0, and so if you cleverly choose zero, you will know that you are smarter than they are, but you won't win the game. The game will be won by someone who chose a positive number nearest to 2/3 of the median. Maybe someone who chose a number near 2/3 of 66, or 2/3 of 2/3 of 66... And indeed that has been the case, with the modal number chosen dropping as players gain experience. Many experiments have followed that original 1995 experiment, some conducted in newspapers among thousands of participants. (Here are the slides I presented about that series of experiments in the first lecture of my Experimental Economics course this past Spring.) A recently reported experiment was among chess players, who turn out to be a lot like humans: Six thousand chess players took part in a beauty contest! By Christoph Bühren and Björn Frank, University of Kassel. (See also Jeff Ely's nice account here: Grandmasters Play the Beauty Contest Game)
One of the things that struck me about the report by Bühren and Frank was that they include A historical note on the Beauty Contest. They trace the game back to a 1981 French puzzle magazine, which, astonishingly, also seems to have run a large scale experiment among their readers:
"In 1981, the French magazine "Jeux & Stratégie", a popular magazine devoted mainly to strategic board games, but also covering card games and mathematical games, arranged a big readers' competition consisting of mathematical puzzles but also problems from games such as chess, bridge and go. Ledoux (1981) reports on almost 15,000 participants, 4,078 of them being ex aequo, hence the winner had to be decided in a playoff. All first round winners received a letter with new puzzles, and to avoid another round with multiple winners, chief editor Alain Ledoux invented in the last question of this letter what is today known as the Beauty Contest (the name given to it by Ledoux, according to an email to us from July 9th, was “psycho-statistique”, although this does not appear to have appeared in print). Readers were asked to state an integer between 1 and 1,000,000,000, the winning number being the one closest to two third of the average! The average turned out to be 134,822,738.26, two third of this being 89,881,825.51. This is 8.99 percent of the maximum number, markedly less than what is typically found in first rounds of Beauty Contest experiments. However, as explained above, the participants had been pre-selected, having solved a series of puzzles in the first round of the contest, and they knew that everyone else was pre-selected. Both facts should result in the pretty high depth of reasoning."
Scientists and scholars spend a lot of effort tracing back "first" discoveries, and this one is a great find. Nagel's original paper already referred to the fact that the great game theorist Hervé Moulin discussed the game in one of his books, and elaborated on the dominance solvable structure underlying the proof I sketched above. (It was this iterative-reasoning structure that Nagel's original experiment was designed to investigate, and the game has found wide use since then for that purpose, see e.g. the 2006 AER paper by the two (now) British economists Miguel Costa Gomes and Vincent Crawford, "Cognition and Behavior in Two-Person Guessing Games: An Experimental Study". The two-person games have a simplicity that lets alternative hypotheses be more easily separated, in this connection see also the 2008 GEB paper by Brit Grosskopf and Rosemarie Nagel, "The two-person beauty contest. )
Of course, it often happens that, once an important contribution is made and understood and disseminated and built upon, prior discoveries are uncovered. It's good to rediscover earlier attempts, that may have been forgotten because they were "before their time", i.e. because they didn't lead to a lasting scientific or cultural conversation when first proposed.
I once wrote about this as follows:
"Columbus is viewed as the discoverer of America, even though every school child knows that the Americas were inhabited when he arrived, and that he was not even the first to have made a round trip, having been preceded by Vikings and perhaps by others. What is important about Columbus' discovery of America is not that it was the first, but that it was the last. After Columbus, America was never lost again..." (Roth and Sotomayor 1990, p. 170):
(In a similar vein, Jack Rosenthal, writing the On Language column in the NY Times Sunday Magazine, speaks of "...Stigler’s Law of Eponymy, which states that any scientific discovery named for someone is not in fact named for its actual discoverer. ...Stephen Stigler, the University of Chicago statistician who proposed the law in 1980, attributed it to the sociologist Robert Merton, who suggested something similar in 1968.")
Some final notes (for those of you who have followed to the end of this long post).
Stigler's Law might equally well be applied to the name of Nagel's experimental game. She initially called it a "guessing game," but also referred to Keynes' famous metaphor about investing in the stock market
""[P]rofessional investment may be likened to those newspaper competitions in which the competitors have to pick out the six prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors as a whole; so that each competitor has to pick, not those faces which he himself finds prettiest, but those which he thinks likeliest to catch the fancy of the other competitors, all of whom are looking at the problem from the same point of view."
This isn't a perfect analogy to the guessing game; as Nagel suggested, if the goal were to pick the average number (instead of 2/3 of the average), the game would be as difficult for perfectly rational players as for humans, since there would be a continuum of equilibria. But the "beauty contest" name has stuck. As it happens, there's another important family of experimental games, introduced in a 1990 AER paper by John B. Van Huyck, Raymond C. Battalio, and Richard O. Beil, "Tacit Coordination Games, Strategic Uncertainty, and Coordination Failure" that is much closer to Keynes' beauty contest.
The Nagel paper also has "unraveling" in the title, which refers to the sense in which the "p beauty contest game" with p less than 1 is a reduced form model of the kind of unravelling we see in labor markets and other kinds of markets, e.g. in which employers sometimes try to be earlier than their competitors, with a resulting race to the bottom.
Full (and proud) disclosure: back in the previous millenium, Rosemarie was a postdoctoral fellow of mine, at the University of Pittsburgh, 1994-5. She suggests I mention that her initial inclination to do a careful experiment on this game came from considering her own thought processes when playing the game, and that "one should participate in many experiments when being or wanting to become an experimenter..."
Wednesday, September 23, 2009
"CHAMPAIGN, Ill. (AP) -- University of Illinois President B. Joseph White, who has been at the center of an admissions scandal, has resigned.
... White has been under fire since this summer over reports that the university admitted politically connected students over more qualified ones at its Champaign-Urbana campus."
"I agree with Brand that the term amateur is not a good fit for modern college sports, but it has definitely not outlived it usefulness for the NCAA. The myth of amateurism shields college sport from tax collectors and members of Congress, seeking unrelated business income taxes, and allows the NCAA to cap athletic subsidies at room, board, tuition and fees. The NCAA will probably play the “amateurism card” to fight a class action lawsuit filed this summer over its use of former athletes’ likenesses to sell licensed products.
So what can the NCAA do to end the pretense that big-time college athletes are amateurs, short of abandoning athletic scholarships or openly turning pro? The first step is to take Brand’s “off the cuff” suggestion seriously and drop the term amateur when referring to scholarship athletes.
The next step would be to adopt a model that continues the practice of awarding athletic scholarships to the nation’s most talented athletes, but eliminates conditions generally associated with employment. Borrowing a term from Myles Brand, I would call this the “collegiate model.”
Under current NCAA rules, athletes who fail to meet athletic expectations can lose their athletic scholarships, i.e., be “fired” at the end of the year, thus transforming athletic scholarships into contracts for hire. And because athletes are subject to their coaches’ control in return for payment of room, board, tuition and fees, they arguably meet common law definitions of employees. The collegiate model, on the other hand, would make satisfactory progress in the classroom the condition for renewing athletic scholarships. "
Tuesday, September 22, 2009
"Starting next week, customers at Harvard Book Store will be able to buy in minutes books that once would have taken weeks to find. The service comes courtesy of the Mass. Ave. retailer’s new printing machine, which will make it the first bookseller in the nation with the ability to print 3.6 million titles on demand. The Espresso Book Machine—produced by New York-based firm On Demand Books—has been rolled out to a select few stores to date, but the one at Harvard Book Store will be the first with access to the 2 million public-domain texts digitized by Google, which also announced a deal with On Demand last Thursday. "
"The Espresso Book Machine will be able to print a 300-page paperback book in four minutes, according to Gain, who added that printed books will be competitively priced and indistinguishable from those sitting on the shelves. Customers will be able to request a book to be printed online or in the store, after which they can either pick it up in-store within minutes or have the book delivered by bicycle either the same or next day. Books can also be shipped to domestic or overseas locations. "
The deal with Macabee Haifa has since been finalized, and InsideHoops.com editor says: So instead of being surrounded by little kids on a HS basketball court, Tyler will make 140k and play with adults he can actually learn from. And then instead of being a college freshman a year later, he’ll probably do the same, perhaps for a bit more money. So he’ll have earned a quarter million dollars or so in two years before most players earn a penny (aside from the under the table stuff that just about every good young player gets). The thing is, I don’t think an overseas team is going to go out of their way to train him more than they would any other player, considering he’s only committed to be there for one year. Still, he should at least get way more out of being there for a year than he would as a HS senior."
And, it's not just basketball: here's a story from the Cleveland Plain Dealer on both Tyler and baseball star Bryce Harper: Teens turning pro? Their choice
"Baseball player Bryce Harper of Las Vegas and basketball player Jeremy Tyler of San Diego have found ways to manipulate their sports' entry-level restrictions and turn pro early, much the same way Bernie Kosar did in 1985 when he graduated two years early from Miami and entered a supplemental draft so the Browns could take him. "
Monday, September 21, 2009
"American junior tennis has had a major change in the last five years. Aspiring pros now commonly abandon regular school for home or online educational programs. Although alternative schooling is not new to junior athletics, tennis is perhaps the only sport whose full participation requires it because of year-round competition and travel. "
Apparently the issue is that tennis players are ranked in part by the number of tournaments they do well in, so they have to play in lots of tournaments.
Sunday, September 20, 2009
"Supercomputers allow certain traders to profit by executing trades in milliseconds, a practice known as high-frequency trading. These traders also use a technique called flash orders that gives them a sneak peek at other investors’ orders to buy and sell stock. ...
"...similar criticisms have been made for over 100 years, since the days when trades on the New York Stock Exchange were executed by humans using notepads and pencils.
Even back then, critics claimed that the exchange members who were physically present on the floor could get trading information and execute their own orders faster than anyone else. The creation of the Securities and Exchange Commission in 1934 included the power to regulate the buying and selling of securities by exchange members trading for themselves, rather than for customers.
A Roosevelt administration official testifying in support of the 1934 legislation, Thomas Corcoran, described such floor traders as “chiselers.” This referred to their ability to quickly buy from sellers at prices lower than they would otherwise get, and promptly resell to buyers at prices higher than they would otherwise pay.
These complaints were well founded. By being on the exchange floor, traders could see with their own eyes the prices of completed trades minutes before they appeared on the exchange tape. Executing their own orders gave them a head start over ordinary investors, whose orders could take minutes to reach the floor. As a former Wall Street Journal editor wrote in 1903, “They know the prices even before they are recorded on the tape, and they are able to join in every upward movement the moment it begins, and to abandon it the moment it shows signs of wavering.”
In 1909, a committee created by Gov. Charles Evans Hughes of New York to study stock market abuses similarly commented that floor traders “acquire early information concerning the changes which affect the values of securities,” giving them “special advantages” over other traders. "
Saturday, September 19, 2009
Ray Fisman and Shang-Jin Wei have a paper that attempts to measure how often such laws are flouted (by comparing export declarations and U.S. import declarations--not everything that is illegal to export is illegal to import). It's called "The Smuggling of Art and the Art of Smuggling: Uncovering the Illicit Trade in Cultural Property and Antiques ," AEJ-Applied Economics, 1,3,2009.
It turns out that the level of illegal exports from a country is correlated with how often its UN diplomats violate NYC parking regulations.
Friday, September 18, 2009
"Yahoo! Research's CentMail resurrects an old idea: that levying a charge on every email sent would instantly make spamming uneconomic. But because the cent paid for an accredited "stamp" to appear on each email goes to charity, CentMail's inventors think it will be more successful than previous approaches to make email cost. They think the cost to users is offset by the good feeling of giving to charity."
"Some previous schemes, such as Goodmail, simply pocketed the charge for the virtual stamps. Another deterred spammers by forcing computers to do extra work per email; and Microsoft's version requires senders to decipher distorted text."
Here's an earlier post.Here's another story: Will Users Donate a Penny Per Email to Fight Spam, Yahoo Wonders, which notes
"It’s not clear how much the proposal would help, however, since so much of the spam is now sent using botnets, which are networks of zombie PCs whose owners have no idea their computers are part of a massive spamming organization."
Thursday, September 17, 2009
"GETTING a rejection letter is a painful part of job hunting, but at least it means you’ve been noticed. These days, I’ve been hearing about more job hunters who respond to online job postings, only to hear nothing back from the company. Ever."
"...before you get too angry at companies that ignore you, consider what they are up against.
First, the Internet has made it absurdly easy to apply for jobs. This means that unqualified people are clogging the system with their wing-and-a-prayer applications.
Then add rising numbers of unemployed people. More job seekers — qualified, unqualified and desperate — are hitting the send button. Acknowledgments are going by the wayside as recruiters confront hundreds of applications for a single job.
In fact, organizations received 75 percent more applications, on average, in the first half of 2009, compared with the same period in 2008, according to a survey by the Corporate Executive Board, a network of executives and a research company. "
How about business-oriented social networks liked LinkedIn, in which people can recommend each other?
" "Obtaining an employee referral is a good move, as far as it goes. There is just one problem: Nowadays “the referral channel is jammed in the same way that other channels are jammed,” Mr. Safferstone said."
A "fast auction" in which the high bidders buy themselves gift cards and compete for bonus amounts on the card, so that different cards sell at different discounts.
"Rackup’s team is lead by Marc Rochman and is supported by a board that includes Stanford Prof. Paul Milgrom, one of the most prominent experts in auction theory, and Duke Prof. Dan Ariely, author of “Predictably Irrational”. The company raised early-stage funding from the founders and some private investors, amounting up to $3.5 million."
HT: Joshua Gans
Wednesday, September 16, 2009
Last year, the blog Above the Law urged students holding multiple summer offers to accept one quickly: Accept Your Offers: Stop Screwin' Around You Kids Screw Around Too Much.
"If you are a 2L sitting on multiple offers, could you please -- for the love of God -- accept one of them already, so the spots you don't want can be filled by other candidates? ... And it might be in your best interest as well. The career services office at U. Penn Law School sent around a letter to students today, urging them to make a decision:
We recommend that you do not wait until the expiration of the offer to render a decision... Wednesday, we learned that one of your 2L colleagues had their offer for employment rescinded before the expiration of the offer because the firm experienced a higher than usual acceptances from outstanding offers..."
This year, Above the Law suggests (tongue in cheek?) Accept Your Offers: All of Them.
"It seems to me that the "social compact" between firms and students has completely broken down. We've been living in a Hobbesian state of nature for almost a year now.
NALP tells students that they should not hold more than two offers open, or else. Or else what? As Jim Leipold, executive director of NALP, recently observed, "There are no NALP police."
As far as we know, NALP hasn't done anything to firms that have disrespected the 45-day "open offer" period. What are they going to do to students that accept more than two offers?
We asked NALP these questions directly. We asked why a student should be willing to follow the NALP guidelines when firms have flouted them with impunity during the recession. We asked why students should adhere to NALP guidelines when law school deans are saying that the firms will not.
We received no response. So now we're asking you:
Shouldn't an intelligent 2L accept every offer of summer employment he or she gets? If some firms revoke that offer quickly, so what? It's probably a firm you don't want to summer with anyway.
Once you've decided which firm to go with, you can politely decline the other offers you accepted..."
While I think that reputational concerns will prevent law students from accepting multiple offers, there is obviously a great deal of justified concern when law firms make offers and then rescind them (we're not just talking about summer offers now). Here is NALP's statement on rescinded offers (which begins "Please note: NALP's Principles and Standards do not condone rescinding offers. However, in recognition that rescission does occasionally occur, NALP presents this article with suggestions for ameliorating the situation. ")
"The NRMP Board of Directors, meeting in Washington, DC on May 4, 2009, voted to proceed with implementation of a "managed" Scramble for the Main Residency Match. A joint NRMP-AAMC work group will continue to refine the plan, which will require programs to offer and applicants to accept unfilled positions through the NRMP R3 System during Match Week. A "managed" Scramble would be implemented no earlier than the 2011 Match, according to NRMP Executive Director Mona M. Signer. " (http://www.nrmp.org/ on 9/13/09)
Tuesday, September 15, 2009
Playing the Admissions Game: Student Reactions to Increasing College Competition by John Bound, Brad Hershbein, Bridget Terry Long - #15272 (ED LS)
Abstract: Gaining entrance to a four-year college or university, particularly a selective institution, has become increasingly competitive over the last several decades. We document this phenomenon and show how it has varied across different parts of the student ability distribution and across region, with the most pronounced increases in competition being found among higher-ability students and in the Northeast.
Additionally, we explore how the college preparatory behavior of high school seniors has changed in response to the growth in competition.
We also discuss the theoretical implications of increased competition on longer-term measures of learning and achievement and attempt to test them empirically; the evidence and related literature, while limited, suggests little long-term benefit.
"Overall, high school students in 2004 engaged in significantly more behavior associated with college preparation, on average, than did their counterparts from 10 and 20 years before. The share taking at least a semester of calculus in high school rose from 9.2 percent to 15.2 percent between 1982 and 2004. In just the 12 years from 1992 to 2004, the fraction of seniors having taken at least one Advanced Placement (AP) exam nearly doubled, from 16.5 to 30.9 percent." (p12) (but reported time spent on homework is down)
"...data from CIRP's Freshman Survey shows that the percentage of college
freshmen who regularly volunteered during their senior year of high school increased rapidly from about 45 percent in 1987 and 1988 up to about 70 percent by 2000, where it has roughly remained since." (p14)
"While 25 percent of students had applied to four or more schools in 1972, more than half had by 2004. Figure 4 shows that the percentage of students applying to seven or more schools rose from about 3 percent in 1972 to 18 percent in 2004. This implies that more than half of the increase among those applying to four or more schools is driven by those applying to seven or more schools; within the last ten years, more than three quarters of the increase
is from those applying to seven or more schools. The increase in application rates has been widespread throughout the selectivity distribution, with students at highly selective institutions not only sending more applications on average, but also increasing the number of applications sent at a faster pace earlier on.
Another proxy for college application behavior is the number of SAT score reports sent to various colleges.16 When taking the SAT, students are allowed to send up to four score reports at no additional marginal cost. However, in recent years, students have been sending far more score reports. As shown in the three panels of Figure 5, the number of scores sent (and the likelihood of sending more than four) rises dramatically with the student's score. For those with scores above 1400 (around the 97th percentile), the median number of reports sent is around eight, which suggests that even students with very high scores do not feel that they can rely on being accepted into a top school." (p19)
"The story of Ms. Whitaker’s two organ donations — the first from her mother and the second from her boyfriend — sheds light on a Medicare policy that is widely regarded as pound-foolish. Although the government regularly pays $100,000 or more for kidney transplants, it stops paying for anti-rejection drugs after only 36 months."...
"Most of the cost of [her] dialysis and the transplant, totaling hundreds of thousands of dollars, was absorbed by the federal Medicare program, which provides broad coverage for those with end-stage renal disease.
Despite that heavy investment, federal law limits Medicare reimbursement for the immunosuppressant drugs that transplant recipients must take for life, at costs of $1,000 to $3,000 a month."...
"By late 2003, her transplanted kidney had failed, and she returned to dialysis, covered by the government at $9,300 a month, more than three times the cost of the pills. Then 15 months ago, Medicare paid for her second transplant — total charges, $125,000 — and the 36-month clock began ticking again.
“If they had just paid for the pills, I’d still have my kidney,” said Ms. Whitaker, who shares an apartment in the La Jolla neighborhood with her boyfriend, Joseph D. Jamieson. “I’d be healthy, working and paying taxes.” "...
"Bills have been introduced in Congress since 2000 to lift the 36-month limit and extend coverage of immunosuppressant drugs indefinitely. They have never made it to a vote, largely because of the projected upfront cost; the Congressional Budget Office estimates that unlimited coverage would add $100 million a year to the $23 billion Medicare kidney program.
But the cost-benefit analysis would seem obvious. The most recent report from the United States Renal Data System found that Medicare spends an average of $17,000 a year on care for kidney transplant recipients, most of it for anti-rejection drugs. That compares with $71,000 a year for dialysis patients and $106,000 for a transplant (including the first year of monitoring)...."
"A provision to cover the drugs is in the sweeping House health care bill, which has cleared three committees. It is uncertain whether the Senate Finance Committee will include it in its bill.
Since 1973, end-stage renal disease has been the only condition specifically covered by Medicare regardless of age. In 1988, coverage was extended for 12 months to anti-rejection drugs, which had recently been developed. Congress gradually lengthened the cutoff to 36 months, and then in 2000 made the benefit unlimited for those who are at least 65 or disabled. The rationale for leaving out younger transplant recipients was simply that the money was not there, Congressional aides said. "
In other kidney news, I understand through the grapevine that the planned September pilot of a national kidney exchange program to be conducted by UNOS has been put on hold for the time being.
Monday, September 14, 2009
Harvard's Neiman Journalism Lab reports on Google's marketplace proposal, which would allow customers to maintain a Google account that could be billed without requiring the customer to maintain accounts or reveal information to each content provider: Google developing a micropayment platform and pitching newspapers: “‘Open’ need not mean free”
How should small fees for copying copyrighted material be collected and distributed? About once a year, I get a communication from The Authors Registry , which works to find authors on whose behalf such fees--presumably collected by the penny in copyshops and libraries--have been collected.
"The Authors Registry is a not-for-profit clearinghouse for payments to authors, receiving royalties from organizations and distributing them to U.S. authors. It was founded in 1995 by a consortium of U.S. authors' organizations: The Authors Guild, The American Society of Journalists & Authors, the Dramatists Guild, and the Association of Authors' Representatives. To date, the Authors Registry has distributed over $8,000,000 to authors in the United States."
They seem to be closely affiliated with the Authors' Licensing & Collecting Society (UK).
"The Authors’ Licensing and Collecting Society (ALCS) represents the interests of all UK writers and aims to ensure writers are fairly compensated for any works that are copied, broadcast or recorded. Writers’ primary rights are protected by contract, but it is the life of the work over the following decades that needs to be monitored and fairly rewarded. It is with secondary rights that copyright has an important role to play in protecting writers and creators from unpaid use and moral abuse of their work. Secondary use ranges from photocopying and repeat broadcast transmission in the UK and overseas to reproduction in journals and repeat use via the internet and digital reproduction."
"Photocopying of books and serials currently accounts for approximately 70% of income. The ALCS together with the Publishers Licensing Society (PLS) has appointed the Copyright Licensing Agency (CLA) to act as its agent to license the photocopying right on its behalf and on behalf of its members on a non-exclusive basis. A small number of CLA licences now include the authority for limited scanning. Public Lending Right ALCS administers German, Austrian, Dutch and French Public Lending Right (PLR) for UK authors, and is in the process of entering into agreements with other European countries where PLR is being incorporated in to national legislation. UK PLR is administered by Public Lending Right based in Stockton-upon-Tees and funded by the Department of Culture, Media and Sport (DCMS). "
The collections are quite small; e.g. my recent statement, which seems to originate in the ALCS looks like this:
PHOTOCOPYING - OVERSEAS Miscellaneous CLA Monies - Inside EU 1.02
NON TITLE SPECIFIC Miscellaneous CLA Monies - UK 40.03
PHOTOCOPYING - OVERSEAS Miscellaneous CLA Monies - Outside EU 15.52
SUBVENTION ON ACCOUNT Miscellaneous CLA Photocopying Fees 7.97
PLS Balancing Payment General CLA Photocopying Fees 2007 - 2008 34.56
Update: for those of you who don't normally click to see comments, the comment below by Jon Baron, the eminent Penn psychologist, is well worth reading...
Sunday, September 13, 2009
"By the late 1940s, researchers knew they could induce huge yield gains in wheat by feeding the plants chemical fertilizer that supplied them with extra nitrogen, a shortage of which was the biggest constraint on plant growth. But the strategy had a severe limitation: beyond a certain level of fertilizer, the seed heads containing wheat grains would grow so large and heavy, the plant would fall over, ruining the crop.
In 1953, Dr. Borlaug began working with a wheat strain containing an unusual gene. It had the effect of shrinking the wheat plant, creating a stubby, compact variety. Yet crucially, the seed heads did not shrink, meaning a small plant could still produce a large amount of wheat.
Dr. Borlaug and his team transferred the gene into tropical wheats. When high fertilizer levels were applied to these new “semidwarf” plants, the results were nothing short of astonishing.
The plants would produce enormous heads of grain, yet their stiff, short bodies could support the weight without falling over. On the same amount of land, wheat output could be tripled or quadrupled. Later, the idea was applied to rice, the staple crop for nearly half the world’s population, with yields jumping several-fold compared with some traditional varieties.
This strange principle of increasing yields by shrinking plants was the central insight of the Green Revolution, and its impact was enormous."
Frost, Jeana H., Zoe Chance, Michael I. Norton, and Dan Ariely. People Are Experience Goods: Improving Online Dating with Virtual Dates. Journal of Interactive Marketing 22, no. 1 (winter 2008): 51-62.
Abstract: "We suggest that online dating frequently fails to meet user expectations because people, unlike many commodities available for purchase online, are experience goods: Daters wish to screen potential romantic partners by experiential attributes (such as sense of humor or rapport), but online dating Web sites force them to screen by searchable attributes (such as income or religion). We demonstrate that people spend too much time searching for options online for too little payoff in offline dates (Study 1), in part because users desire information about experiential attributes, but online dating Web sites contain primarily searchable attributes (Study 2). Finally, we introduce and beta test the Virtual Date, offering potential dating partners the opportunity to acquire experiential information by exploring a virtual environment in interactions analogous to real first dates (such as going to a museum), an online intervention that led to greater liking after offline meetings (Study 3)."
"The invitation to the latest Fashion Meets Finance party — an affair that shamelessly includes only women who work in fashion and men from Wall Street — declared that the dark days are over — not just for the economy, but in the dating market. “We are here to announce the balance is restoring itself to the ecosystem of the New York dating community,” the party organizers said on their cheeky Web site."
"“From my experience, I’ve dated lawyers and doctors and they’re nice; I just prefer finance,” Ms. Yanush said, before applying a fresh gloss of candy-apple-red lipstick in the ladies room. “My girlfriends who are in long-term relationships with finance guys are very happy.” "
"The idea behind Fashion Meets Finance began in 2007 with Beth Newill, a merchandiser for Ann Taylor at the time, who found the garment district was a poor neighborhood in which to meet men. After speaking with a male friend who worked in finance and had expressed the same frustration about the absence of eligible women in the financial district, Ms. Newill organized regular happy hours for the two groups."
"The text with the latest invitation, the first party since January, was typical: “We fear that news of shrinking bonuses, banks closing and the Dow plummeting confused the gorgeous women of the city who understood that their shelf life is quick and fleeting like a senator’s South American love affair. The uncertainty caused panic which caused irrational decisions — there’s going to be a two-year blip in the system where a hot fashion girl might commit to a pharmaceutical salesman.”
The women were encouraged to hold on because the recession is over, and it would only be a matter of time before a boyfriend in finance enabled them to quit their jobs to be “tennis moms.”
Jeremy Abelson, 29, the founder of an online luxury newsletter called Pocket Change, who creates most of the Web site’s copy, said, “It’s offensive but it’s very realistic.” "
The article closes by quoting someone who didn't meet the woman of his dreams: "“Let’s just say I’m not going to find my future ex-wife here,” he said."
Saturday, September 12, 2009
Here's what I wrote about debtor's prison, in Repugnance as a Constraint on Markets:
"The changing repugnance of debt and of involuntary servitude have even interacted in changes to bankruptcy law. In colonial America and the early years of the Republic, insolvent debtors could be imprisoned, or sentenced to indentured servitude (Coleman, 1974 ). But as involuntary servitude became more repugnant and debts less repugnant, bankruptcy laws were rewritten to be less punitive to debtors."(p. 40)
The recent decisions by some universities to manage their shortage of central-campus parking has raised some eyebrows:
Recession? Valet Parking Arrives.
And, indeed, that story makes it sound as if some of the parking decisions are meant to increase customer service where there's a shortage of conveniently located parking.
That being said, it's often more convenient to be able to park yourself rather than have to rely on someone else. But parking lots (and, in Manhattan, multi-story garages served by car elevators) in which the attendants park all the cars allow more cars to be accomodated in a given amount of space. It may be a luxury to leave your car for someone else to park, but it's seldom a luxury to wait while your car is brought out of parking.
Years ago, a colleague from Brazil remarked that one thing she liked about living in the United States was that she didn't have to deal with servants. I foolishly asked why in that case she couldn't just dispense with servants when she was in Brazil. The answer of course was that many things that are designed for self service here are more labor intensive there. I recall that one example was that chicken is sold shrink-wrapped and ready to cook in American supermarkets, but was apparently sold with pinfeathers still attached in Brazil (in those days).
Friday, September 11, 2009
- "Applicants who obtain positions through the Matching Program are prohibited from discussing, interviewing for, or accepting a concurrent year position with another program before a waiver has been granted by the NRMP.
- The deadline for an applicant to request a waiver based on change of specialty is the January 15 prior to the start of training in the matched program.
- Programs shall use the Applicant Match History in the Match Site to determine the match status of any applicant considered for appointment to the program.
- Applicants must provide complete, timely, and accurate information to programs.
- Programs are prohibited from requiring applicants to reveal ranking preferences or the names or identities of programs to which they have or may apply.
Thursday, September 10, 2009
The Chronicle of Higher Ed has a first person account of one such struggle, that ended successfully with two tenure-track assistant professorships at the same university: Lessons of a Dual Hire.
The (pseudonymous) author writes:"After three years of job searching for me in the geological sciences, and four years for my husband in engineering, we successfully maneuvered this year to find two tenure-track positions at the same university. Here's how it happened."
The article goes on to explain some of the difficulties that were overcome in the most recent, successful job search.
Here are two earlier related posts, both of which touch on my work on making the clearinghouse for new doctors, the National Resident Matching Program, more friendly to couples.
Job market for couples (which concerns law schools hiring of couples); and
Match Day for new doctors, which is specifically about couples who are both seeking jobs as new doctors.
Even the medical clearinghouse doesn't do much to help doctors whose spouses have non-medical careers (or even doctors whose spouses have medical careers with different years of graduation from medical school). Some years ago, I was asked to respond to an essay from a doctor's spouse which suggested that maybe the market would work better without a match, i.e. without any centralized clearinghouse. That essay, and my reply, were published in an online student edition of JAMA that no longer exists, on web pages that are no longer maintained. However I am linking to them below, on the remarkable internet archive also known as the Wayback Machine.
Mismatch, by Betsy Brody, University of Notre Dame
Response to Betsy Brody's "Mismatch" by Alvin E. Roth (both originally in MSJAMA, April 7, 1999.
Rereading my response, I would have written it a bit differently today, but the basic point still seems right. But two-career searches are tough, no doubt about it.
If you have a Massachusetts driver's license you can register online to be an organ donor, right now, right here.
Wednesday, September 9, 2009
"The state judiciary has abandoned a controversial proposal to fill coveted law clerk jobs at no cost to the government with newly hired private lawyers whose firms have pushed back their start dates because of the recession."
"Mulligan had proposed the arrangement in the spring because of two related employment trends. Tight finances had forced the state to rescind job offers it had made in December to at least 24 recent law school graduates who wanted to work as law clerks. And the bad economy had prompted some law firms to defer bringing on first-year associates at full salaries.
Many firms around the country are paying such “deferred associates’’ stipends of about $60,000, less than half their regular starting salaries of about $150,000, to hold onto them until the economy improves.
Some firms have recommended that the fledgling lawyers volunteer at nonprofit groups or engage in public service. And several local firms asked Mulligan whether their associates in waiting could perform their public service as law clerks.
Some legal specialists had said an arrangement that involves a law firm paying a judicial employee raised thorny ethical questions; firms that donate lawyers to the courts might appear to be currying favor or expect preferential treatment.
"But Mulligan won the approval of the Committee on Judicial Ethics of the Supreme Judicial Court after he proposed a special “double blind’’ arrangement.
The Flaschner Judicial Institute, which provides continuing education to state judges, would have dealt with the law firms that supplied the clerks. Judges and court officials would have had no contact with the donating firms, and the firms would have been instructed not to identify the clerks on their websites. The clerks would have been barred from disclosing which firms were paying their stipends."
Here is my earlier post on the proposal: Law clerks for Massachusetts courts
"Discussions at industry roundtables and casual talk among officials at leading schools and firms suggest a consensus that interview dates should be pushed back to the spring of the second year, if not the third year. The recent problems have arisen, reform-minded critics say, because the legal industry essentially hires two full years ahead of when employees begin to work. And because young lawyers have to be advanced by lockstep every year, it is difficult to make recruiting changes that are responsive to shocks in business.
“There’s a long list of issues that need re-examining,” said Ralph Baxter, the chairman of Orrick. “The current economic circumstances have helped people see the economic inefficiencies we’ve been living with.”
Even lockstep, as sacred a pillar of Big Law as the billable hour, has been undermined by the hiring headaches of the last year, some argue. Orrick and another major firm, Howrey, have introduced innovative programs for associates based on apprenticeships or tiered systems that depart from the traditional “up or out” partner-track models. Some industry observers say their moves represent first steps that may ultimately give firms greater flexibility in hiring."
Tuesday, September 8, 2009
Over at Education Sector, the September 2009 issue of their feature Ideas at Work covers the new school choice mechanisms for Boston Public Schools and New York City high schools:
MATCHMAKING: ENABLING MANDATORY PUBLIC SCHOOL CHOICE IN NEW YORK AND BOSTON, By Thomas Toch and Chad Aldeman. (It also comes with a 10 minute podcast you can listen to: "A Closer Look at Mandatory School Choice", in which Aldeman interviews me and Atila...)
Joseph Malkevitch has written one of the American Mathematical Society's Monthly Essays, called School Choice.
It's an introduction to Gale and Shapley's basic deferred acceptance algorithm, with a discussion of some applications, with attention paid to the fact that the student proposing algorithm makes it safe for families to reveal their preferences.
While the very beginning of the third year of law school might seem early to be sorting out the plum jobs, in fact it is quite late by the historical standards of this market. Over the last few decades, hiring has periodically unraveled back well into the second year of law school. And so, not for the first time, judges are trying to restrain themselves. Here's the current plan and it's key dates: Federal Judges Law Clerk Hiring Plan with Critical Dates .
Tuesday, Sept. 8 is the "first date when applications may be received." Judges are then supposed to wait until Friday Sept. 11 before contacting candidates to schedule interviews, and to wait until the following Thursday, Sept. 17, before actually conducting any interviews or making any offers. Offers, often exploding offers that must be answered immediately, can be made at the interview, and so much of the market is over by the end of the first day. (Yesterday's post included my favorite exploding offers story.)
One more thing. Judges cheat. (My coauthors tell me I'm not supposed to say that, rather, some judges do not comply with the guidelines.) So a nonnegligible part of the market is over before it's supposed to be over. Some part of the market may even be over before it's supposed to have begun. In our 2007 Chicago Law Review article The New Market for Federal Judicial Law Clerks, a third of the judges acknowledged that they cheated. But for the time being they were largely cheating by only a few days, so that the Labor Day focal point has remained.
The law blogs are full of contemporary reports about this year's market. See e.g. Getting Your Clerkship Before Labor Day? It's Not Just for Graduates Anymore and Clerkship Application Season: Open Thread
There are also some blogs that will post news in real time, including when particular judges have begun to hire, and when they finish. They open a window on the amount of "non-compliance." See Law Clerk Addict, and Clerkship Notification Blog .
The situation well before the current attempt to organize the clerkship market is described here: Federal Court Clerkships in Roth, A.E. and X. Xing, "Jumping the Gun: Imperfections and Institutions Related to the Timing of Market Transactions," American Economic Review, 84, September, 1994, 992-1044
The more proximate history of the market before the current attempt is here:
Avery, Christopher, Christine Jolls, Richard A. Posner, and Alvin E. Roth, "The Market for Federal Judicial Law Clerks" University of Chicago Law Review, 68, 3, Summer, 2001, 793-902.(online at SSRN)
The just-prior attempt to organize the market is described here, and investigated experimentally:
Haruvy, Ernan, Alvin E. Roth, and M. Utku Unver, “The Dynamics of Law Clerk Matching: An Experimental and Computational Investigation of Proposals for Reform of the Market,” Journal of Economic Dynamics and Control, 30, 3 , March 2006, Pages 457-486. (With appendices and experimental instructions here.)
And the early experience with the current market organization is described here (with lots of illustrative quotes from clerkship applicants).
Avery, Christopher, Jolls, Christine, Posner, Richard A. and Roth, Alvin E., "The New Market for Federal Judicial Law Clerks" . University of Chicago Law Review, 74, Spring 2007, 447-486.
Monday, September 7, 2009
My favorite exploding offer story is probably this one:
"I received the offer via voicemail while I was in flight to my second interview. The judge actually left three messages. First, to make the offer. Second, to tell me that I should respond soon. Third, to rescind the offer.
It was a 35 minute flight." −2005 applicant for federal judicial clerkships (p448 of "The New Market for Federal Judicial Law Clerks" )
Exploding offers can have a malign effect on market performance. Here's a just-published experimental investigation that focuses on how exploding offers contribute to the unraveling of a market:
Niederle, Muriel, and Alvin E. Roth, “Market Culture: How Rules Governing Exploding Offers Affect Market Performance," American Economic Journal: Microeconomics, 1, 2, August 2009, 199-219.
(In case you were always wondering how lawyers and gastroenterologists are similar, and different, these two papers will give you some clues, at least for when they are looking for jobs...)
Here's the Abstract of the AEJ Micro paper: Many markets encounter difficulty maintaining a thick marketplace because they experience transactions made at dispersed times. To address such problems, many markets try to establish norms concerning when offers can be made, accepted and rejected. Examining such markets suggests it is difficult to establish a thick market at an efficient time if firms can make exploding offers, and workers cannot renege on early commitments. Laboratory experiments allow us to isolate the effects of exploding offers and binding acceptances. In a simple experiment, we find inefficient early contracting when firms can make exploding offers and applicants’ acceptances are binding.
"Defenders of life settlements argue that creating a market to allow the ill or elderly to sell their policies for cash is a public service. Insurance companies, they note, offer only a “cash surrender value,” typically at a small fraction of the death benefit, when a policyholder wants to cash out, even after paying large premiums for many years.
Enter life settlement companies. Depending on various factors, they will pay 20 to 200 percent more than the surrender value an insurer would pay. "
"Mr. Terrell was the co-head of Bear Stearns’s longevity and mortality desk — which traded unrated portfolios of life settlements — and later worked at Goldman Sachs’s Institutional Life Companies, a venture that was introducing a trading platform for life settlements. He thinks securitized life policies have big potential, explaining that investors who want to spread their risks are constantly looking for new investments that do not move in tandem with their other investments.
“It’s an interesting asset class because it’s less correlated to the rest of the market than other asset classes,” Mr. Terrell said. "
But life insurance is the kind of product that has always had at least a tinge of repugnance, which is why many states have "insurable interest" laws saying that someone can only purchase insurance on your life if they have a reason to want you to be alive. "As discussed by Justice Oliver Wendell Holmes Jr. in a 1911 Supreme Court case: “A contract of insurance upon a life in which the insured has no interest is a pure wager that gives the insured a sinister counter interest in having the life come to an end” "
That's from my paper Repugnance as a Constraint on Markets , where I went on to say"The insurance industry lobbies against Stranger (or Investor) Owned Life Insurance (SOLI) and “viatical settlements,” which are third party markets and funds that purchase life insurance policies from elderly or terminally ill patients who wish to realize the cash value of their policies while still alive. The arguments against such funds often focus on the repugnance of having life insurance held by an entity that profits from deaths (in contrast to insurance companies, which make money when their customers continue living). Of course, sellers of annuities also profit from untimely deaths."(p41)
Some of the quotations from the NY Times story make me wonder whether the securitizers have fully mastered the potential repugnance issue of this kind of investment, and whether that might ultimately affect its success. See if any of these lines strike you as courting a reaction of repugnance.
"Goldman Sachs has developed a tradable index of life settlements, enabling investors to bet on whether people will live longer than expected or die sooner than planned....Spokesmen for Credit Suisse and Goldman Sachs declined to comment. "
"In addition to fraud, there is another potential risk for investors: that some people could live far longer than expected.
It is not just a hypothetical risk. That is what happened in the 1980s, when new treatments prolonged the life of AIDS patients. Investors who bought their policies on the expectation that the most victims would die within two years ended up losing money.
It happened again last fall when companies that calculate life expectancy determined that people were living longer. "
"The solution? A bond made up of life settlements would ideally have policies from people with a range of diseases — leukemia, lung cancer, heart disease, breast cancer, diabetes, Alzheimer’s. That is because if too many people with leukemia are in the securitization portfolio, and a cure is developed, the value of the bond would plummet. "
"But even with a math whiz calculating every possibility, some risks may not be apparent until after the fact. How can a computer accurately predict what would happen if health reform passed, for example, and better care for a large number of Americans meant that people generally started living longer? Or if a magic-bullet cure for all types of cancer was developed? If the computer models were wrong, investors could lose a lot of money."
Sunday, September 6, 2009
Slate has a story, Should parents meddle in their kids' classroom assignments?, which in turn prompted a post, the class matching problem, by Joshua Gans on his economics-and-parenting blog Game Theorist. (Gans' contribution to the "-onomics" library is called Parentonomics. He's also a prolific contributor to the econ- literature, and is likely to be a sabbatical visitor at Harvard in 2010. See my earlier post Market for ideas.)
In elementary school, kids have only one class. In high school, you have to assign each kid a bundle of classes. That makes the problem both harder—because bundles are hard, and there are complementarities—and easier, because one class isn’t divisible, but bundles are…you can give a high school kid some good classes and some bad ones, and have it come out to an ok schedule. Eric Budish has made some progress on this, although without worrying about putting friends in the same class (see my earlier post Course allocation, by Eric Budish )