Paul Milgrom on the history of spectrum auctions

How obscure science led to spectrum auctions that connected the world
BY PAUL MILGROM,  04/30/17 07:00 AM EDT

"The incentive auction I helped design is an innovation building on decades of economic theory research on auctions dating back to the Nobel-prize winning work of William Vickrey and to work by my own research advisor, Robert Wilson, in the 1960s with funding from the Atomic Energy Commission. What interest did this Cold War era agency have in theoretical auctions? Well, nothing, but they were highly interested in advancing the field of game theory – a then obscure branch of mathematics used in economics that aims to understand how individuals strategize and act in competitive situations.


Over more than 30 years, Wilson, I, and others continued to advance this seemingly esoteric field, until the FCC issued its first proposed rulemaking on developing a spectrum auction that referenced our work. Together with Preston McAfee, who had independently been developing similar ideas, we worked with the FCC to design the first spectrum auction in 1994. The simultaneous multiple round auction we invented has since been used for dozens of spectrum auctions here and around the world. Collectively, these have been called the greatest auction in history, delivering more than $60 billion for the federal government since the early 1990s and enabling the robust wireless communications we enjoy today.

In 2014, the three of us received a Golden Goose Award for our work in this obscure field of social science and its unexpected application to spectrum auctions. None of us envisioned such an auction when we began our study, we were driven by a curiosity in human behavior and markets, not data flying around the country. But the auctions we designed have nonetheless helped change the way we all communicate, consume media, and do our work.

The auction that closed last month was the first of its kind, both because it was two-sided, engaging both TV broadcasters as sellers and mobile operators as buyers, bidding in a single auction, and because the choices of which TV broadcast rights to buy and how to reassign continuing broadcasters needed to respect more than a million constraints to avoid interference among uses. Designing such a complex process brought together a new generation of researchers in both economic and computer science.

When the dust had settled, we were able to repurpose channels 38-51 from broadcast TV uses to free 70 megahertz of spectrum for the growing mobile broadband sector (plus 14 megahertz for wireless microphones). This will enable continuing innovation in broadband and bring better coverage to rural communities. The auction also raised nearly $20 billion in revenue, with more than $7 billion to federal coffers to be used for debt reduction.

Our work on auction design is just one example of how research that may sound obscure or even silly has often benefited society. The Golden Goose Award was founded five years ago to celebrate stories like ours, and it has recognized colleagues of mine like Al Roth whose studies of how to make perfect marriage matches now informs medical residency assignments and kidney exchanges, among many other researchers. In each case, a small investment of federal money returned huge benefits to our nation. And all led to outcomes the researchers never would have predicted when they started."

The 28th Jerusalem School in Economic Theory: Mechanism Design, June 27 - July 6, 2017

The 28th Jerusalem School in Economic Theory

Mechanism Design

Event date: June 27 - July 6, 2017 

Organizers:

Eric Maskin, General Director (Harvard University)
Elchanan Ben-Porath, Codirector (The Hebrew University)
Stephen Morris (Princeton University)







Mechanism design is the “reverse engineering” part of economic theory. Normally, economists study existing economic institutions and try to predict or explain what outcomes the institutions generate. But in mechanism design we reverse direction: we start by identifying the outcomes we want and then ask what institutions could be designed to achieve those outcomes. The theory has found wide application in auction design, pollution control, public good provision, and elsewhere.


List of speakers:


NAME	AFFILIATION	EMAIL
Elchanan Ben- Porath	The Hebrew University of Jerusalem	benporat@math.huji.ac.il
Ben Brooks	The University of Chicago	babrooks@uchicago.edu
Sylvain Chassang	New York University	chassang@nyu.edu
Eddie Dekel	Northwestern University and Tel-Aviv University	eddiedekel@gmail.com
Sergiu Hart	The Hebrew University	hart@huji.ac.il
Jason Hartline	Northwestern University	hartline@northwestern.edu
Emir Kamenica	The University of Chicago	emir.kamenica@chicagobooth.edu
George Mailath	University of Pennsylvania	gmailath@econ.upenn.edu
Jakub Kastl	Princeton University	jkastl@princeton.edu
Eric Maskin	Harvard University	emaskin@fas.harvard.edu
Stephen Morris	Princeton University	smorris@princeton.edu
Tim Roughgarden	Stanford University	tim@cs.stanford.edu
Ariel Rubinstein	Tel-Aviv University and New-York University	rariel@post.tau.ac.il
Vasiliki Skerta	University College London	v.skerta@ucl.ac.uk
Balazs Szentes	London School of Economics	b.szentes@lse.ac.uk

Israel transplant investigation

The Israeli organization Matnat Chaim (Gift of Life), founded by Rabbi Yeshayahu Heber, is under investigation about whether it encouraged families to contribute to the organization in order to receive a shorter waiting time for a kidney transplant.

Organ donor organization suspected of moving donors to head of line for money
Police currently investigating an organization specializing in organ donor mediation, on suspicion of receiving money to provide donors with organs before others in line for transplants.
Omri Efraim & Rotem Elizera|Published:  31.03.17 , 15:06

"Israel Police is carrying on an investigation into Matnat Chaim, an organization that helps find organ donations for those in need of a transplant. The investigation is centered on claims that the organization charged for a "donation" intended to push forward those who paid it, despite there being other people in front of them in line waiting for the same organ donation.
...
"The police stressed that the investigation is a very delicate one, involving people who are suspected of paying the extra fee out of a wish to facilitate a vital transplant that for a member of their family.

Matnat Chaim stated that "We know nothing about the investigation carried against (the organization—ed), and so we do not find it necessary to respond." The organization has so far aided in some 400 transplants in Israel. It only works with organ donors wishing to donate organs for zero pay."
**********
Here's another story with a bit more detail:

Police launch inquiry into kidney transplant organizationCops investigating claims that Matnat Chaim bumped patients to top of recipient list in exchange for donations

"The probe follows a complaint from the Health Ministry that recipients were bumped to the top of the list in exchange for donations to the organization.

Police have taken evidence from organ recipients, their families and other sources in the ongoing investigation.

A police spokesperson explained that the investigation was complex and sensitive. The organization is suspected of encouraging relatives of those in need of transplants to make donations to the organization in order to shorten the waiting time to receive a kidney.
...
"Over 400 healthy people have donated a kidney through the organization.
...
"In the past, the organization has said that it had never agreed to accept donations in exchange for promoting a patient in the waiting list. It said that “it completely rejects any suggestion of any hint of wrong-doing.”

Talking to nephrologists about kidney exchange

Most conversations about kidney exchange (aka kidney paired donation, kpd) are with transplant professionals. But kidney patients start out being referred to a nephrologist, and so it was good to be able to talk to nephrologists at the recent meeting of the National Kidney Foundation.

My talk was about how kidney exchange has made a lot of progress, and become a standard part of transplantation, but that there's still room for it to grow and help more patients get transplants.   In that regard I focused on two recent initiatives, starting a non-directed donor chain with a deceased donor kidney, and global kidney exchange to bring developing world patient-donor pairs into American kidney exchange to the mutual benefit of both kinds of pairs.

Here's a news story from Nephrology News (with a headline that unfortunately disses the many pioneers of kidney exchange):

Father of kidney exchange says it’s time for a refresh

And here's a story that focuses on starting kidney exchange chains with a deceased donor kidney, from the Dutch Nier nieuws (Kidney news)

'Start donatieketting met overleden donor'
("Start donation chain with deceased donor")

Bobby Pakzad-Hurson defends his dissertation

Bobby Pakzad-Hurson defended his dissertation yesterday. (Successfully:) You can find his papers at the link. This celebratory photo was taken by Susie Gilbert.

Here's Bobby (in the suit, holding the bottle) with his committee: Fuhito Kojima, me, Nick Bloom, Matt Jackson and Itai Ashlagi.

Bobby's job market paper (with Zoe Cullen) was on pay transparency. He'll be going to Brown next year.

Welcome to the club, Bobby.

Organ transplantation in Iran

Robert Gutman draws my attention to this article from the English language Iranian Financial Tribune:  Sunday, April 23, 2017 Strides in Organ Transplant

I'm not sure where the claim in the first sentence of 50,000 organ transplant "surgeries" comes from, but the rest of the article (which seems to talk about a total closer to 5,000 transplants) is an interesting view of the situation in Iran.


"Over 50,000 organ transplant surgeries were conducted during the last fiscal year that ended on March 20.

Around 2,500 kidney, 802 liver, 119 heart, 30 pancreas and several intestine and lung as well as 1,040 bone marrow transplants were performed in Iran during the period, said Seyyed Mohammad Kazemeini, head of the Organ Transplant Management Office at the Health Ministry.

“This impressive number of transplant surgeries has helped save many lives as well as more than $1.8 billion in foreign exchange, as patients would otherwise have paid huge amounts for the medical help abroad. Some were even treated free,” the official was quoted as saying by ISNA.

However, he regretted that insurance companies still refuse to cover expenses of organ transplants despite a government directive last year.

“Insurance companies are not complying and the Health Ministry has to draw on its own resources to provide free services for some patients,” he said and hoped the ministry’s support would continue.

“During this year’s New Year holidays (March 21- April 2), 93 transplants were performed,” which shows the preparedness of the medical fraternity.

Iranian organ transplant teams are capable of providing assistance and training to neighboring countries, he said.

Last year a team of experts from Mashhad, capital of the northeastern Khorasan Razavi Province, carried out 47 renal transplants in Afghanistan, and medical teams from Shiraz, capital of the southwest Fars Province, conducted 20 operations in Pakistan and Tajikistan.

Shiraz University of Medical Sciences is known for its accomplishments in liver transplants and the hospitals under its coverage are among the top medical centers in the world with regard to the number of surgeries performed. On average, 500 liver transplants and 300 kidney surgeries are annually undertaken in Shiraz, which also has the distinction of performing the first kidney transplant in Iran in 1968 at the prestigious Namazi Hospital.

A specialized hospital is now planned to be established in Shiraz for organ transplants.

Iran ranks third worldwide in organ donation and is the only country in the world that has addressed the shortage of transplant organs through a legal payment system since 1988 when living non-related donation (LNRD) was legalized,  making it the only country where organ sale is legal.

There are currently 46 organ transplant centers in the country and 25 facilities for organ donation.

  Increase in Brain-Dead Organ Donation

According to Kazemeini, people’s tendency to donate organs of brain-dead patients in their families has increased significantly.

“Last year, 57% of transplant kidneys were donated by brain-dead patients,” he said.

In the past organ donation or sale by living people was predominant. The acceptance of organs of brain-dead patients has improved remarkably due to legal and religious decrees and widespread awareness campaigns on the issue.

Organ transplant is a medical procedure in which an organ is removed from one body and placed in the body of a recipient, to replace a damaged or missing organ.

Today, over 1.4 million people have voluntary organ donation cards in the country. On average, 700 organ donations (nine per million people) are made annually according to official statistics.

Organs that have been successfully transplanted include heart, kidney, liver, lung, pancreas, intestine, and thymus. Worldwide, kidneys are the most commonly transplanted organs, followed by liver and heart. Organ donors may be living, brain dead, or dead via circulatory death.

In the fiscal year that ended in March 2016, from among the 8,000 people confirmed as brain dead at Iranian hospitals, 1,400 kidneys (and 2,300 organs) were donated.

Kidney transplants account for nearly 75% of all organ replacement surgeries while liver and heart transplants comprise 22% and 3% of the total number. More than half of all transplanted kidneys (56%) were from brain-dead donors and 44% were from living people.

Kazemeini had earlier pointed to Iran’s top position in the field of kidney transplant in the Middle East. On average, 3,000 kidney transplants are conducted every year and Iranian surgeons have transplanted over 35,000 kidneys so far."

Medical marijuana is now legal in half the U.S.

The Washington Post points out that this will be hard to reverse, even though that may be the position of the Trump administration:  If Jeff Sessions wants to crack down on medical marijuana, he’ll have to battle more than half the country

The FCC Spectrum Incentive Auction: conference at Duke

Here's a chance to hear about one of the most exciting auctions of modern times...

The FCC Spectrum Incentive Auction: Lessons for the Future

Friday, May 12, 2017, 8:30 a.m. - 1:30 p.m.
Duke University's "Duke in DC" offices
1201 Pennsylvania Avenue, NW, Suite 500 | Washington, DC 20004

The FCC is concluding the most complex auction in history, the culmination of a decade-long planning process for moving spectrum from broadcast to mobile broadband uses. On the morning of May 12, The Center for Innovation Policy at Duke Law will hold a half-day conference that will identify lessons from this auction for spectrum policy, government disposition of assets (whether of spectrum or other resources), and the future of innovation policy generally. The conference will be at Duke in DC, 1201 Pennsylvania Ave., NW, Suite 500, Washington, DC. The program is free and open to the public; due to limited space, registration is required (see the link below).

Speakers include: Lawrence Ausubel, Univ. of Maryland, Power Auctions; Jonathan Chaplin, New Street Research; Paul de Sa, Quadra Partners; Gary Epstein, FCC; Karla Hoffman, George Mason Univ.; Allan Ingraham, Economists Inc.; Edward Lazarus, Tribune Media; Michael Ostrovsky, Stanford Graduate School of Business; Preston Padden, Boulder Thinking; Charla Rath, Verizon; Dorothy Robyn, former Commissioner at GSA; Gregory Rosston, Stanford Univ.; David Salant, Auction Technologies; Steve Sharkey, T-Mobile; and Ilya Segal, Stanford Univ.

PRELIMINARY AGENDA

8:30 AM	Introduction
8:35 AM	Auction Design
9:45 AM	Auction Implementation
11:15 AM	Auction Participation and Future Directions
12:30 PM	Adjourn

Market design at Harvard Business School

Here's the announcement of a new HBS course on market design:

Making Markets

Course Number 1764

Professor Thomas R. Eisenmann
Associate Professor Scott Duke Kominers
Spring; Q3Q4; 3 credits
24 sessions
Paper

Markets are everywhere - and where they’re not, you can build them!

Career Focus

Over the past twenty years, entrepreneurs have created and captured enormous value by launching new marketplaces. Examples include Airbnb, Alibaba, ClassPass, Craigslist, eBay, eHarmony, Etsy, Gerson Lehrman Group, Google, IEX Group, Lending Club, Kickstarter, OpenTable, Rakuten, Uber, Upwork, and many more.

Making Markets (M²) is intended for students who want to manage in marketplace environments and remedy market failures by building new platforms and marketplaces from scratch or by redesigning existing ones - or who want to advise or invest in entrepreneurs who pursue such opportunities.

Educational Objectives

Students will learn how to identify market failures and determine when those failures create opportunities to launch or redesign marketplaces.

First, we will explore how markets function and what makes them fail. Next, we will examine how effective marketplace design-or redesign-can address market failures and improve efficiency, liquidity, and fairness. Then, we will take the entrepreneur’s perspective, studying the key barriers to organizing new marketplaces and devising strategies for overcoming them. Along the way, we will pay special attention to settings in which marketplaces create more value for transaction partners than relying only on unmediated exchanges. As we will see, marketplace design can often “square the circle,” solving seemingly intractable problems simply by reducing transaction costs or barriers to entry.

Case contexts will range from ultra-local (e.g., the HBS EC course lottery) to truly global (e.g., container shipping); will examine private and public/social enterprise settings; will profile both online and offline marketplaces; and will span all stages of marketplace launch and development.

Course Content

Through case studies, simulations, and the occasional interactive lecture, M² will examine the design, launch, and management of marketplaces and marketplace platforms. Core lessons include:

• The Structure and Purposes of Markets: Markets create value by enabling parties to execute mutually beneficial transactions - exchanging goods, say, or sharing ideas. They are everywhere that transacting parties face incentives - from classic contexts like financial or product markets to dating, recruiting, and the sharing economy.
  Some markets are completely unstructured, but most are subject to at least some rules that shape participation. In this course, we will focus in particular on markets that are organized through marketplaces that combine rules for participation with infrastructure to facilitate interactions and transactions.
• Common Sources of Market Failure: In many markets, institutional frictions combine with incentives to produce suboptimal outcomes - socially wasteful transactions occur, or productive ones do not. When such market failures occur, entrepreneurial opportunities arise: reshaping the market to improve efficiency creates value that can be captured(!).
  To understand how to fix markets, however, we must first understand how and why market failures occur. The course will classify different types of market failures, and highlight entrepreneurial responses to each.
• Strategies for Launching and Managing Marketplaces: When launching a marketplace or other market intervention, it is essential to mobilize a critical mass of market participants so that there is enough liquidity for valuable transactions to occur. Once running, a marketplace must maintain balance between its supply and demand sides, or else participants may leave to transact elsewhere. Yet at the same time, marketplaces must avoid crowding that makes it hard for participants to find high-value transaction partners.
  The course will provide strategies for promoting participation and trust in marketplaces, especially early on. Then, we will learn techniques for growing marketplaces, and combating the problems that marketplaces face at scale, such as congestion, “unraveling” (e.g., when recruiters pressure candidates with early and exploding offers), and the risk of disintermediation.
• Types of Marketplace Mechanisms: Markets work in many different ways. Some compel participants to seek out their own transaction partners; others use centralized transaction discovery and execution systems like auctions and recommendation algorithms. The mechanisms that a marketplace uses to identify and process transactions can be the difference between success and failure.
  Choosing among marketplace mechanisms requires careful attention to market participants’ needs and transaction attributes. The course will provide guidelines for adopting mechanisms best suited for different market contexts.

School choice in Indianapolis: podcast of my talk at the Economic Club of Indianapolis

Here's a link to the broadcast of my talk on radio WYFI in Indianapolis, on markets, marketplaces, Who Gets What, and school choice with unified enrollment which is coming to Indianapolis next year.

Economic Club of Indiana / Dr. Alvin Roth

Match Up 2017: April 20-21 at Microsoft Research New England

MATCH-UP 2017, the fourth workshop in the series of interdisciplinary and international workshops on matching under preferences, will take place April 20-21, 2017.

Venue:Microsoft Research New England Cambridge, MA 02142

	DAY 1
8:00 A.M.	Breakfast
8.45 A.M.	Invited Talk 1 —Estelle Cantillon, Université libre de Bruxelles The efficiency – stability tradeoff in school choice: Lessons for market design Abstract: A well-known result for the school choice problem is that ex-post efficiency and stability may not be compatible. In the field, that trade-off is sometimes small, sometimes big.  This talk will summarize existing and new results on the drivers of this trade-off and derive the implications for the design of priorities and tie-breaking rules.
9.30 A.M.	Session 1
10.30 A.M.	Break
10.50 A.M.	Session 2
12.30 P.M.	Lunch
1:00 P.M.	Outlook Talk 1 – Al Roth, Stanford Frontiers of Kidney Exchange Abstract: Kidney exchange is different from many market design efforts I’ve been involved in, because it affects the everyday conduct of transplant centers, so we’re constantly adapting to their big strategy sets…(in contrast to e.g. annual labor markets or school choice which don’t affect the daily conduct of residency programs and schools …)The early design challenges in kidney exchange mostly involved dealing with congestion (and the solutions involved long chains, standard acquisition charges, and attempts to better elicit surgeons’ preferences over kidneys).The current challenges to kidney exchange involve creating more thickness in the markets, and I’ll touch on several new initiatives: 1. Frequent flier programs to encourage transplant centers to enroll more of their easy to match pairs; 2. Global kidney exchange; 3. Information deserts: populations of Americans who don’t get transplants; 4. Deceased donor initiated chains ; a. Increasing deceased donation: military share, priority in Israel
2:00 P.M.	Session 3
3.40 P.M.	Break
4:00 P.M.	Session 4
5:00 P.M.	Invited Talk 2 – Aaron Roth, UPENN Approximately Stable, School Optimal, and Student-Truthful Many-to-One Matchings (via Differential Privacy) Abstract: In this talk, we will walk through a case study of how techniques developed to design “stable” algorithms can be brought to bear to design asymptotically dominant strategy truthful mechanisms in large markets, without the need to make any assumptions about the structure of individual preferences. Specifically, we will consider the many-to-one matching problem, and see a mechanism for computing school optimal stable matchings, that makes truthful reporting an approximately dominant strategy for the student side of the market. The approximation parameter becomes perfect at a polynomial rate as the number of students grows large, and the analysis holds even for worst-case preferences for both students and schools. Joint work with: Sampath Kannan, Jamie Morgenstern, and Zhiwei Steven Wu.
5.45 P.M.	Break
6:00 P.M.	Poster Lightning Talks
6.30 P.M.	Reception and Poster Session
8:00 P.M.	END
	DAY 2
8:00 A.M.	Breakfast
8.45 A.M.	Invited Talk 3 — Michael Ostrovsky, Stanford Matching under preferences: beyond the two-sided case Abstract: I will present an overview of several recent papers showing that most of the key results of matching theory generalize naturally to a much richer setting: trading networks. These networks do not need to be two-sided, and agents do not have to be grouped into classes (“firms”, “workers”, and so on). What is essential for the generalization is that the bilateral contracts representing relationships in the network have a direction (e.g., one agent is the seller and the other is the buyer), and that agents’ preferences satisfy a suitably adapted substitutability notion. For this setting, for the cases of discrete and continuous sets of possible contracts, I will discuss the existence of stable outcomes, the lattice structure of the sets of stable outcomes, the relationship between various solution concepts (stability, core, competitive equilibrium, etc.), and other results familiar from the literature on two-sided markets.
9.30 A.M.	Session 5
10.30 A.M.	Break
10.50 A.M.	Session 6
12.30 P.M.	Lunch
1:00 P.M.	Lunch w/Outlook Talk 2 — David Manlove, University of Glasgow Selected Algorithmic Open Problems in Matching Under Preferences Abstract: The research community working on matching problems involving preferences has grown in recent years, but even so, plenty of interesting open problems still exist, many with large-scale practical applications.  In this talk I will outline some of these open problems that are of an algorithmic flavour, thus giving an outlook on some of the research challenges in matching under preferences that the computer science community might seek to tackle over the next decade.
2:00 P.M.	Session 7
	Making it Safe to Use Centralized Markets: Epsilon - Dominant Individual Rationality and Applications to Market Design Speakers: Ben Roth and Ran Shorrer Abstract: A critical, yet under-appreciated feature of market design is that centralized markets operate within a broader context; often market designers cannot force participants to join a centralized market. Well-designed centralized markets must induce participants to join voluntarily, in spite of pre-existing decentralized institutions they may already be using. We take the view that centralizing a market is akin to designing a mechanism to which people may voluntarily sign away their decision rights. We study the ways in which market designers can provide robust incentives that guarantee agents will participate in a centralized market. Our first result is negative and derives from adverse selection concerns. Near any game with at least one pure strategy equilibrium, we prove there is another game in which no mechanism can eliminate the equilibrium of the original game. In light of this result we offer a new desideratum for mechanism and market design, which we term epsilon-dominant individual rationality. After noting its robustness, we establish two positive results about centralizing large markets. The first offers a novel justification for stable matching mechanisms and an insight to guide their design to achieve epsilon-dominant individual rationality. Our second result demonstrates that in large games, any mechanism with the property that every player wants to use it conditional on sufficiently many others using it as well can be modified to satisfy epsilon-dominant individual rationality while preserving its behavior conditional on sufficient participation. The modification relies on a class of mechanisms we refer to as random threshold mechanisms and resembles insights from the differential privacy literature.
3.40 P.M.	Break
4:00 P.M.	Session 8
5.20 P.M.	Break
5.30 P.M.	Invited Talk 4 — Marek Pycia, UCLA Invariance and Matching Market Outcomes Abstract: The empirical studies of school choice provide evidence that standard measures of admission outcomes are the same for many Pareto efficient mechanisms that determine the market allocation based on ordinal rankings of individual outcomes. The paper shows that two factors drive this intriguing puzzle: market size and the invariance properties of the measures for which the regularity has been documented. In addition, the talk will explore the consequences of these findings: the usefulness of non-invariant outcome measures and of mechanisms that elicit preference intensities.
6.15 P.M.	Closing Remarks
6.30 P.M.	END