Who volunteers for the volunteer army?

When I was young, the Viet Nam was was underway, and the way the American army got many soldiers was by conscription. But conscription ended in 1973, the Army has been an all volunteer force since then.

One reason it's interesting to look at who American soldiers are is because of the light it might shed on other debates, such as the one about whether living kidney donors should be compensated, and what would be the likely change in the pattern of donations should the law be changed to allow that.  One concern that arises is that, if kidneys could be bought and sold, the sellers would be the poorest of the poor, in desperation.

That isn't who end up in the American Army, it turns out. Here's a 2008 report from the Heritage Foundation that casts some light on the subject. It appears that being an American soldier is a good enough job that you have to have substantial human capital to be able to qualify.

Who Serves in the U.S. Military? The Demographics of Enlisted Troops and Officers
By Shanea Watkins, Ph.D. and James Sherk

"Based on an understanding of the limitations of any objective definition of quality, this report compares military volunteers to the civilian population on four demographic characteristics: household income, education level, racial and ethnic background, and regional origin. This report finds that:

1. U.S. military service disproportionately attracts enlisted personnel and officers who do not come from disadvantaged backgrounds. Previous Heritage Foundation research demonstrated that the quality of enlisted troops has increased since the start of the Iraq war. This report demonstrates that the same is true of the officer corps.
2. Members of the all-volunteer military are significantly more likely to come from high-income neighborhoods than from low-income neighborhoods. Only 11 percent of enlisted recruits in 2007 came from the poorest one-fifth (quintile) of neighborhoods, while 25 percent came from the wealthiest quintile. These trends are even more pronounced in the Army Reserve Officer Training Corps (ROTC) program, in which 40 percent of enrollees come from the wealthiest neighborhoods-a number that has increased substantially over the past four years.
3. American soldiers are more educated than their peers. A little more than 1 percent of enlisted personnel lack a high school degree, compared to 21 percent of men 18-24 years old, and 95 percent of officer accessions have at least a bachelor's degree.
4. Contrary to conventional wisdom, minorities are not overrepresented in military service. Enlisted troops are somewhat more likely to be white or black than their non-military peers. Whites are proportionately represented in the officer corps, and blacks are overrepresented, but their rate of overrepresentation has declined each year from 2004 to 2007. New recruits are also disproportionately likely to come from the South, which is in line with the history of Southern military tradition.

The facts do not support the belief that many American soldiers volunteer because society offers them few other opportunities."

HT: Volokh conspirators

Purple market design at Northwestern: Jeff Ely and Sandeep Baliga auction football tickets

Blogging would be easy if I got more emails like this one from eminent game theorists. Its subject line was "our foray into market design":

dear al,

sandeep baliga and i persuaded northwestern athletics to let us auction off their football tickets.  the auction starts tomorrow. you can see it here:

http://www.nupurplepricing.com/

we put together a little video to explain how the auction works. (in simple terms its a uniform-price dutch auction).

  http://www.youtube.com/watch?v=MjTsjTwuW14

we would love it if you could mention it on your blog.

jeff

(Any complaints from disgruntled Wildcats should be directed to  Jeffrey Ely and/or Sandeep Baliga. Or maybe you could comment on their blog Cheap Talk, one of the economics blogs that I follow.)

Non-directed kidney donors are increasing (and are increasingly important)

Here's a story on the increasing number of non-directed kidney donors: Amid organ shortage, altruistic kidney donations increase but bring forth ethical debate

This line caught my eye:
 "It's difficult to pinpoint a single reason for the uptick, but more than 50 percent of altruistic donations ever performed -- 1,374 as of April -- came after 2009, when numbers of traditional living donors started falling."

I am only speculating, but I'm guessing that the relatively small drop in live kidney donation has to do with the recession: when times are hard, it's harder to arrange time for a kidney surgery, since we don't allow donors to be compensated, and aren't even as good as we should be at covering their costs.
As for the growth of non-directed donations since 2009, that's when the first non-simultaneous non-directed donor chain was reported in the New England Journal of Medicine, and that and other long chains since then may have garnered enough publicity (such as this and this) to spread the word to potential donors.

In any event, chains started by non-directed donors are an increasingly important part of kidney exchange today, for reasons explored here.

Some memories of Cy Derman

Annals of Operations Research has published online a paper on the life and work of Cyrus Derman, by Katehakis, Olkin and Ross.

1. OriginalPaper

   On the life and work of Cyrus Derman

   Michael N. Katehakis, Ingram Olkin, Sheldon M. Ross…
   

   Download PDF (1150KB) View Article

I knew Derman as an undergrad at Columbia. So, in the manner of undergrads, I didn't know him at all well. I nevertheless remember him fondly.

1. Letter

   Some memories of Cy Derman

   Alvin E. Roth
   

   Download PDF (117KB) View Article

Here's the text of my letter:

I came to Columbia in 1968 as an undergraduate in the engineering school. I didn’t know what I wanted to major in, and declared an interest in nuclear engineering, so that I could take as many physics courses as I wanted. But the summer after my freshman year I took a summer job in Washington D.C. at an Army lab for which I had qualified by taking a civil service exam. They had an OR group, and I returned to school as an OR major.

In the manner of undergraduates, I didn’t have a clear idea of what my teachers did. But I recall admiring Cy Derman’s attitude: he seemed not to take himself too seriously. I recall he wore turtleneck shirts and talked about tennis, and summers at Stanford.

When it came time to think about graduation, Cy urged me to think about grad school in OR, and volunteered to write a letter for me. Some time later, in a reflective moment, he said something to me like “I wrote you a very good letter. I’m not exactly sure why; you didn’t do all that well in your courses. But I have a feeling that you might be good at research.” Cornell and Stanford were the programs he recommended, and when I was accepted at both, his preference was clear, and I followed his advice, which set me on a path I’m still following.

2013 National Donor Designation Report Card Released

Donate Life America releases their annual report on organ donor registration. Here's their summary news release, and a link to the full report:

Donate Life America unveiled its sixth annual National Donor Designation Report Card during the organization’s annual meeting, held in Indianapolis, Indiana, this year. The document reports 109 million people had enrolled in state donor registries by the end of 2012. The public can add to that number and help save the lives of the more than 120,000 men, women and children awaiting organ transplants by designating a donation decision at www.donatelife.net.

This year’s Report Card puts specific emphasis on the efforts of Donate Life America and its constituents to reach the 18-24 year old demographic, who say they have not registered because they “have not heard about it” or “simply have not gotten around to it.”  Though it is extremely important to educate all demographics, the 18-24 is least likely to register, followed closely by people 65 and older, who often erroneously believe they are too old to be organ, eye and tissue donors.

Nationwide, 45 percent of individuals age 18 and older have registered to be organ, eye and tissue donors. Montana and Alaska top the state list with 82 percent and 80 percent respectively, followed by Washington with 78 percent.

The document also reports that of all recovered donors in the United Sates in 2012, 40 percent of organ, 48 percent of eye and 45 percent of tissue donors, were authorized through the state donor registry.  These numbers have continued to rise since Donate Life America began collecting this data in 2007.

“Eighteen people die each day due to a lack of available organs for transplant and the number of people on the national organ transplant waiting list continues to rise, “ said David Fleming, President and CEO of Donate Life America.  “The only way to give greater hope to all of the individuals waiting is for all who have not year registered to take the time to do it today.”

View full report card

Here's a state by state summary from pages 6 and 7 of the report.

First Kidney Exchange in Portugal:

Ana Viana writes from Portugal about the first kidney exchange there, which she and other Operations Researchers helped bring about with some integer programming formulations that they've also written about:

"I am happy to inform you that the first successful kidney exchange in Portugal took place in April.
This was performed under the "Program Nacional para Doação Renal Cruzada" (National Program for Kidney Paired Exchanges), supervised by the Portuguese Institute for Blood and Transplantation ( http://ipsangue.org/).

Below you can find a partial translation of news on the subject that I took from Internet.

To help the decision process the program is using a MIP model developed by myself and my colleagues. It's just the beginning but we are very excited with it!

Best regards,

Ana


---------------------------------------------------------------------

"The two patients who received in April the kidneys from two living donors in the first kidney exchange transplant in Portugal crossover are well, said to LUSA the doctor responsible for the double intervention.

Five additional pairs are currently under study and it is possible that very soon additional transplants can be done, said surgeon Alfredo Mota from Centro Hospitalar da Universidade de Coimbra(CHUC).

(...)

The people involved in the first transplant of its kind in Portugal are a brother (donor) and a sister (patient) and husband (donor) and wife (patient).

(…)

The intervention took more than six hours and involved 12 surgeons, 4 anesthesiologists, 12 nurses and 4 technicians, using four operating rooms at the same time.

This type of intervention is "a breakthrough for the country, placing it at the forefront internationally and with greater opportunity to increase kidney transplants," said the same official.

in http://www.tvi24.iol.pt/503/sociedade/transplante-rins-coimbra-transplantes-cirurgia-tvi24/1454468-4071.html

A video can also be found in http://sicnoticias.sapo.pt/pais/2013/04/19/primeiro-duplo-transplante-cruzado-com-dadores-vivos-realizado-em-coimbra "
**************
The video is just over two minutes, and it is in Portuguese, with some good shots of both a nephrectomy and a transplant.

Here is a paper by Ana and her colleagues, which is already available online and is listed as (forthcoming) in November 2013 in the European Journal of Operational Research, Volume 231, Issue 1, 16 November 2013, Pages 57–68:

New insights on integer-programming models for the kidney exchange problem
by Miguel Constantino,  Xenia Klimentova, Ana Viana, Abdur Rais,

Abstract
In recent years several countries have set up policies that allow exchange of kidneys between two or more incompatible patient–donor pairs. These policies lead to what is commonly known as kidney exchange programs.

The underlying optimization problems can be formulated as integer programming models. Previously proposed models for kidney exchange programs have exponential numbers of constraints or variables, which makes them fairly difficult to solve when the problem size is large. In this work we propose two compact formulations for the problem, explain how these formulations can be adapted to address some problem variants, and provide results on the dominance of some models over others. Finally we present a systematic comparison between our models and two previously proposed ones via thorough computational analysis. Results show that compact formulations have advantages over non-compact ones when the problem size is large.

Dallas celebrates Gary Bolton

...where they are justly proud of him:

Early Interest in Economics Inspired Prof’s Career and Research

Jul. 18, 2013

Dr. Gary Bolton's research focuses on how people negotiate, make decisions and build trust.

When Dr. Gary Bolton started college, inflation was at its highest point in decades. U.S. manufacturing was on the decline. And an oil shortage forced rising gas prices and long lines at the pump.

“As a kid growing up in the ‘70s, I would read the newspaper and wonder why the economy was so messed up,” he said.

Bolton’s interest in the economic conditions as a youth inspired an academic career that has been distinguished by prestigious academic appointments, multiple National Science Foundation grants, dozens of articles in top economic journals and speaking engagements around the world.

Last fall, Bolton, a professor of managerial economics, was named O.P. Jindal Chair and co-director of theCenter and Laboratory for Behavioral Operations and Economics in the Naveen Jindal School of Management. He runs the center with Dr. Elena Katok, his wife, an Ashbel Smith Professor of Operations Management.

The pair came to UT Dallas last year to open the new center and expand their research, he said. The center features laboratory methods, using simulated business situations on computer games, to study how student volunteers make decisions, bargain and negotiate.

“We found it to be an exciting opportunity,” Bolton said. “I think what’s exciting about UT Dallas is that it’s growing fast and has a goal of being a Tier One institution, which I think will happen soon.”

Bolton’s research is focused on decision-making, negotiations and trust-building. He said his graduate school mentor, Nobel Economics Prize winner Dr. Alvin Roth, now Craig and Susan McCaw Professor of Economics at Stanford University, has been a major influence.

“He taught me game theory, which concerns itself with how people make decisions — especially when they interact with one another,” he said. “He also introduced me to experimental economics, which provides a way of testing the ideas we develop in game theory.”

Bolton worked on a consulting team for eBay in 2006 that redesigned a problematic feedback system used to gather information on the reputation of sellers and buyers. Bolton’s articles have been published in such journals as the American Economic Review, Management Science, Journal of Mathematical Psychology and Games and Economic Behavior. He was featured in a History Channel documentary, “Seven Deadly Sins: Greed.” He is on the editorial board of Experimental Economics.

Bolton has received research funding from the National Science Foundation and IBM. Bolton and Dr. Axel Ockenfels, professor of economics at the University of Cologne, developed the Theory of Equity, Reciprocity and Competition, which is explained in their highly cited paper in the American Economic Review. The premise of the theory is that people are not only motivated by their financial payoff but also how their monetary gain compares to the relative payoff of others.

Dr. Hasan Pirkul, Jindal school dean and Caruth Chair of Management, said that Bolton is an influential and renowned scholar whose innovative research contributions are expanding the field of economics.

“We are honored to have Dr. Bolton on our faculty,” Pirkul said. “He is a highly accomplished scholar whose expertise is a tremendous benefit to our students. We are excited about the research that will result from Dr. Bolton and Dr. Katok’s work at the new behavioral research center.”

Dr. Gary Bolton

TITLE: O.P. Jindal Chair of Management Economics, co-director, Center and Laboratory for Behavioral Operations and Economics, Bolton also sits on the board of advisors of the UT Dallas Negotiations Center

RESEARCH INTERESTS: Decision-making: negotiation, trust, reputation-building, social utility, strategic learning

PREVIOUSLY: Schwartz Professor of Business, Pennsylvania State University

Gary is one half of a power couple of scientists: he is married to Elena Katok, also celebrated at Dallas:

Dr. Elena Katok

Professor of Operations Management

Ashbel Smith Professor

Katok is a pioneer in the growing field of behavioral operations management, which examines the way human behavior affects operations management practices, such as production planning and inventory management.

"My interest in behavioral operations management evolved from my interest in experimental economics," she said. "Early on in my career, I was fortunate to have had an opportunity to work with Gary Bolton and Alvin Roth. The topics of market design and strategic procurement naturally lend themselves to being investigated using game theoretic models and laboratory methods, so this was a natural fit."

Her husband, Gary Bolton, holds the O.P. Jindal Chair in Managerial Economics at UT Dallas. Alvin Roth is an economics professor at Stanford University.

Katok helped establish the Behavioral Operations Management section of the Institute for Operations Research and the Management Sciences, which is also known as INFORMS. She is currently president of this section after previously serving as the vice president.

She said she is proud of co-organizing the first Behavioral Research in Operations Management conference, which was established in 2006. The conferences are now held annually, which she said is a testament to the growth of behavioral operations management.

In addition to behavioral operations management, her research expertise includes market design and strategic procurement. Her research has been published in top business and economics journals, including Management Science, Manufacturing and Service Operations Management, andProduction and Operations Management. She is currently a senior editor and the incoming department editor for Behavioral Operations for Production and Operations Management. The National Science Foundation and the Department of Defense are among the organizations that have supported her research.

Before joining UT Dallas this year, she was a professor of supply chain management in the Smeal College of Business at Pennsylvania State University.

She earned her bachelor of science degree in business administration with an emphasis in finance and economics from the University of California, Berkeley. She earned her MBA from Pennsylvania State University, where she also earned her PhD in management science.

School choice in New Orleans

The one-application system in New Orleans is suffering from some growing pains, as it faces the demands of charter schools and others. One difficult question that faces all school districts is how to deal with the non-negligible number of "no-shows" as the school year starts, and the places they may free up in desirable schools that were over capacity. In New Orleans, they have tried to move the date forward by requiring confirmation of plans to attend before the beginning of the school year.

In choice system, New Orleans schools face new problems with no-shows (July 13)

Of course, sometimes the problem is not as big as anticipated

Fewer than 30 students lose seats at Orleans Parish conventional schools (July 16)

Yemeni girl's speech against child marriage goes viral

Al Jazeera has the story, and the moving video, with an 11 year old girl speaking out against child marriage: Yemeni girl's speech against child marriage goes viral

The market for integers: Edelman and Schwarz on IP addresses

Pricing and Efficiency in the Market for IP Addresses
Benjamin Edelman , Harvard Business School and Michael Schwarz, Google
June 9, 2013
Abstract
We consider market rules for the transfer of IP addresses, numeric identi fiers required by all  computers connected to the Internet. Excessive fragmentation of IP address blocks causes growth in the Internet's routing table, which is socially costly, so an IP address market should discourage subdividing IP address blocks more than necessary. Yet IP address transfer rules also need to facilitate purchase by the networks that need the addresses most, from the networks that value them least. We propose a market rule that avoids excessive fragmentation while almost achieving social efficiency, and we argue that implementation of this rule is feasible despite the limited powers of central authorities. We also off er a framework for the price trajectory of IP addresses. In a world without uncertainty, the unit price of IP addresses is constant until all addresses are in use and begins to decrease at that time. With uncertainty, the price before that time is a martingale, and the price trajectory afterwards is a supermartingale. Finally, we explore the role of rental markets in sharing information about address value and assuring allocative efficiency

Kidney exchange chain in India

Kidney exchange makes some progress in India: the story is here.

HT: Seema Arora

Ron Paul on paying organ donors

Ron Paul: End government control of organ transplants and compensate donors

"In his weekly Texas Straight Talk column — which has continued after his departure from Congress in January — Paul called for a repeal of he federal ban on compensating organ donors. Calling the support of the current system nonsensical, Paul asked, “If we trust the market to deliver food, shelter, and all other necessities, why should we not trust it to deliver health care- including organs?”"

Here's his column in full:

***Please note: This is the temporary home for my weekly column until my personal web page is up and running.***

Let Market Forces Solve Organ Transplant Crisis

Ten-year old cystic fibrosis patient Sarah Murnaghan captured the nation’s attention when federal bureaucrats imposed a de facto death sentence on her by refusing to modify the rules governing organ transplants. The rules in question forbid children under 12 from receiving transplants of adult organs. Even though Sarah’s own physician said she was an excellent candidate to receive an adult organ transplant, government officials refused to even consider modifying their rules.

Fortunately, a federal judge intervened so Sarah received the lung transplant. But the welcome decision in this case does not change the need to end government control of organ donations and repeal the federal ban on compensating organ donors.

Supporters of the current system claim that organ donation is too important to be left to the marketplace. But this is nonsensical: if we trust the market to deliver food, shelter, and all other necessities, why should we not trust it to deliver healthcare—including organs?

It is also argued that it is “uncompassionate” or “immoral” to allow patients or insurance companies to provide compensation to donors. But one of the reasons the waiting lists for transplants is so long, with many Americans dying before receiving a transplant, is because of a shortage of organs. If organ donors, or their heirs, were compensated for donating, more people would have an incentive to become organ donors.

Those who oppose allowing patients to purchase organs should ask themselves how compassionate is it to allow those people to die on the transplant waiting list who might otherwise have lived if they were able to obtain organs though private contracts.

Some are concerned that if organ donations were supplied via the market instead of through government regulation, those with lower incomes would be effectively denied access to donated organs. This ignores our current two-tier system for allocating organs, as the wealthy can travel overseas for transplants if they cannot receive a transplant in America. Allowing the free market to alleviate the shortage of organs and reduce the costs of medial procedures like transplants would benefit the middle class and the poor, not the wealthy.

The costs of obtaining organs would likely be covered by most health insurance plans, thus reducing the costs directly borne by individual patients. Furthermore, if current federal laws distorting the health care market are repealed, procedures such as transplants would be much more affordable. Expanded access to health savings accounts and flexible savings accounts, combined with generous individual tax deductions and credits, would also make it easier for people to afford health care procedures such as transplants.

There is also some hypocrisy in the argument against allowing market forces in organ transplants. Everyone else involved in organ transplantation procedures, including doctors, nurses, and even the hospital janitor, receives compensation. Not even the most extreme proponent of government-provided health care advocates forcing medical professionals to provide care without compensation. Hospitals and other private institutions provide compensation for blood and plasma donations, and men and women are compensated for donations to fertility clinics, so why not allow compensation for organ donation?

Sarah Murnaghan’s case shows the fallacy in thinking that a free-market system for organ donations is less moral or less effective than a government-controlled system. It is only the bureaucrats who put adherence to arbitrary rules ahead of the life of a ten-year old child. It is time for Congress to wake up and see that markets work better in all aspects of health care, including organ donation, just as they work better in providing all other goods and services.

Permission to reprint in whole or in part is gladly granted, provided full credit is given.

SITE workship on Dynamic Games, Contracts and Markets, July 29-31 2013

The announcement is here:

Stanford Institute for Theoretical Economics Summer 2013 Workshop
	Segment 4: Dynamic Games, Contracts, and Markets July 29, 30 and 31, 2013 Organized by Yuliy Sannikov, Princeton University; Simon Board, University of California, Los Angeles; Andrzej Skrzypacz, Graduate School of Business, Stanford University and Alexander Wolitzky, Pablo Kurlat, Florian Scheuer, all Department of Economics, Stanford University.
	This Segment of SITE is partially sponsored by The Graduate School of Business, Stanford University. Monday, July 29, 2013 8.30 - 9.00 Breakfast *Part 1: Agency with Frequent Actions 9.00 - 9.45 Yuliy Sannikov, Princeton University: Moral Hazard and Long-Run Incentives 9.45 - 10.15 Coffee 10.15 - 11.00 Tomasz Sadzik, University of California, Los Angeles and Ennio Stacchetti, New York University: Agency Models with Frequent Actions: A Quadratic Approximation Approach 11.00 - 11.30 Coffee 11.30 - 12.15 George Georgiadis, California Institute of Technology and Boston University: Projects and Team Dynamics 12.15 - 2.00 Lunchtime discussion *Part 2: Dynamic Agency 2.00 - 2.45 Guy Arie, Rochester University: Dynamic Costs and Moral Hazard 2.45 - 3.15 Coffee 3.15 - 4.00 Qingmin Liu, Marina Halac and Navin Kartik, all Columbia University: Optimal Contracts for Experimentation 4.00 - 4.30 Coffee 4.30 - 5.15 Mikhail Golosov, Princeton University and Luigi Ioviono, Toulous School of Economics:Social Insurance, Information Revelation, and Lack of Commitment Tuesday, July 30, 2013 *Part 3: Dynamic Mechanism Design 8.30 - 9.00 Breakfast 9.00 - 9.45 Daniel Garrett, Toulouse School of Economics and Alessandro Pavan, Northwestern University: Dynamic Managerial Compensation: On the Optimality of Seniority-Based Schemes 9.45 - 10.15 Coffee 10.15 - 11.00 Andrzej Skrzypacz, Graduate School of Business, Stanford University and Juuso Toikka,Massachusetts Institute of Technology: Mechanisms for Dynamic Bargaining 11.00 - 11.30 Coffee 11.30 - 12.15 Jeffrey Ely, Northwestern University, Alex Frankel and Emir Kamenica, both University of Chicago, Booth School of Business: Suspense and Surprise 12.15 - 2.00 Lunchtime discussion *Part 4: Repeated Games 2.00 - 2.45 Axel Anderson, Georgetown University and Lones Smith, University of Wisconsin, Madison: Dynamic Deception 2.45 - 3.15 Coffee 3.15 - 4.00 Takuo Sugaya, Graduate School of Business, Stanford University: Efficiency in Markov Games with Incomplete and Private Information 4.00 - 4.30 Coffee 4.30 - 5.15 David Rahman, University of Minnesota: Frequent Actions with Infrequent Coordination 6.30 Continued discussion and dissemination of technical knowledge during dinner Wednesday, July 31, 2013 *Part 5: Search/Experimentation/Information Aggregation in Markets 8.30 - 9.00 Breakfast 9.00 - 9.45 Yoon Koo Che, Colombia University and Johannes Horner, Yale University: Optimal Design for Social Learning 9.45 - 10.15 Coffee 10.15 - 11.00 Stephan Lauermann, University of Michigan and Asher Wolinsky, Northwestern University: Search with Adverse Selection 11.00 - 11.30 Coffee 11.30 - 12.15 Marzena Rostek, University of Wisconsin, Madison and Semyon Malamud, EPF Lausanne: Dynamic Thin Markets 12.15 - 2.00 Lunchtime discussion *Part 6: Reputation and Sequential Screening 2.00 - 2.45 Bruno Strulovici, Northwestern University: Coase Conjecture and Efficiency: A Foundation for Renegotiation-proof Contracts 2.45 - 3.15 Coffee 3.15 - 4.00 Dilip Abreu, Princeton University, and David Pearce and Ennio Stacchetti, both New York University: One-Sided Uncertainty and Delay in Reputational Bargaining 4.00 - 4.30 Coffee 4.30 - 5.15 Juan Pablo Xandri, Princeton University: Credible Reforms: A Robust Implementation Approach

Monty Python's take on organ donation

Not for the faint of heart, here is Monty Python's take on becoming registered as a deceased donor...

And here (for the humor impaired) is the Mythbusters review of that clip: “Hello, Can We Have Your Liver?” and the Damage of the Monty Python Sketch, excerpted below

"In the scene in question a knock comes at a man’s door.  “Hello, can we have your liver?” asks John Cleese, clad in a white coat on the doorstep, “But, I’m (still) using it!!!” objects the resident.  His wife comes along as Cleese and company are ripping the liver from her screaming husband, “is this because he took out one of those silly cards?,” she asks, and then adds,  “Typical of him! Always full of good intentions!”

"While art –in this case comedy– can turn our eyes inwards, scenes like this,  urban legends, and other myths have done much to discourage organ donation in our society.  At the crux of the matter is the fact that organ donation can save lives. Many lives. When you pass away your thoughtfulness and selflessness can give someone back a life they might otherwise not live.

"Here is that myth debunked.

"THE MYTH: If I sign my donor card or register my consent & I become injured or sick, the Doctors will not take every care to keep me alive. Instead they will let me die with an eye towards harvesting my organs.

"MYTH BUSTED: The registry can’t be accessed until a person is declared dead. Also, ICU doctors are a different bunch than the Transplant Docs. You need two independent docs trained in the diagnosis of brain death to proceed to donation. No two docs, no donation.

"There’s a bunch of other protections as well. The key thing is, if this myth happened even once, donor rates would collapse, the system requires total confidence."

Medicare's 3 year limit on post-transplant immunosuppressive drugs

A lot has been written about this, here's yet another story that puts a personal edge on a systematic problem and a big waste of taxpayer dollars through a false economy: Medicare disserves younger kidney-transplant patients by DR. JANANI RANGASWAMI, FOR THE INQUIRER

Market design talk at Sun Yat Sen University in Guangzhou

Here's an ex-post account, from which the picture below is taken. (I earlier posted a link to a pre-talk account.) One of the people I met there, Professor Pu Yongjian, of the School of Economics and Business Administration at Chongqing University, gave me his book in Chinese on matching and related topics. I think matching and market design more generally could prove useful in China.

Unraveling in the market for chefs?

It turns out that good restaurants need good cooks, and they are hard to find and keep in the growing market for fancy restaurants: Talent Shortage: Why New York’s Chefs Can’t Find Enough Good Cooks

Stephanie Hurder points out to me that the article hints at possible unraveling of the market:

"Another move is judging final exams at culinary schools like the International Culinary Center. If a chef sees a student whose work impresses them, they can offer the student a trailing gig — like an extended interview in the kitchen — on the spot."

Prize in Game Theory and Computer Science to Edelman, Ostrovsky and Schwarz, and Varian

Here's the prize announcement:

Prize in Game Theory and Computer Science of the Game Theory Society

in Honour of Ehud Kalai, endowed by Yoav Shoham

Following the Call for Nominations, the 2013 Prize is awarded in equal parts to Benjamin Edelman, Michael Ostrovsky, Michael Schwarz, and Hal R. Varian for their papers

Benjamin Edelman, Michael Ostrovsky, and Michael Schwarz, "Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords," American Economic Review 97, pages 242-259, 2007,

and

Hal R. Varian, "Position Auctions," International Journal of Industrial Organization 25, pages 1163-1178, 2007,

for their fundamental analysis of Online Advertisement Auctions.

The Prize committee, appointed by Roger Myerson as President of the Game Theory Society, consisted in 2013 of Paul W. Goldberg, Kevin Leyton-Brown, Éva Tardos, and Bernhard von Stengel.

In their report to the President, they stated their reasons for selecting this work as follows, referring to the papers as "EOS" and "Varian":

A very significant body of research at the interface of game theory and computer science concerns the design of automated mechanisms for economic transactions, which typically take place on the internet. A prime example are advertisements that search engines such as Google, Bing or Yahoo! place next to the results of internet searches for a given keyword. When a user clicks on such an ad, the search engine receives money from the advertiser. The payment is determined by an auction mechanism that computes the available advertisement "slots" to the bids which are dynamically provided by the bidders for each keyword search.

EOS and Varian (independently) analyzed an auction format known as the "generalized second price auction", a term coined by EOS, which is now used by the major search engines. Their work is of unparalleled theoretical and practical influence. At the time of this writing, it has attracted over 1,400 combined citations (about 800 for EOS and 600 for Varian) and the two articles are by far the most influential papers in the area.

The design of market mechanisms that are implemented algorithmically represents a most fruitful interaction of game theory and computer science. The work of EOS and Varian has spawned research - and, also significantly, attractive jobs for economic and computing theorists - to an extent that they clearly deserve the Prize.

Congratulations to the winners! They will present their work at the occasion of the award on July 17, 2013, at the Workshop on Computational Game Theory in Stony Brook, New York.

---

Call for nominations - Prize in Game Theory and Computer Science

(mailed to GTS members by Roger Myerson on 25 April 2013)

The Prize in Game Theory and Computer Science of the Game Theory Society was established in 2008 by a donation from Yoav Shoham in recognition of Ehud Kalai's role in promoting the connection of the two research areas. The last time the Prize was awarded at the Third World Congress of the Society in 2008 in Evanston. This time, the Prize will in 2013 be awarded at the Workshop on Computational Game Theory in Stony Brook, New York (July 16-18, 2013).

The Prize will be awarded to the person (or persons) who have published the best paper at the interface of game theory and computer science in the last decade. Preference will be given to candidates of age 45 or less at the time of the award, but this is not an absolute constraint. The amount of the Prize will be USD 2,500 plus travel expenses of up to USD 2,500 to attend the scientific event where the Prize is awarded.

The Game Theory Society invites nominations for the Prize. Each nomination should include a full copy of the paper (in pdf format) plus an extended abstract, not exceeding two pages, that explains the nature and importance of the contribution.

Nominations should be emailed to the Society's Secretary-Treasurer, Federico Valenciano (at federico.valenciano@ehu.es ) by 15 May 2013. The selection will be made by a committee appointed by the President, and the result will be announced in June 2013.

Egg donation in Israel at a new, higher price

Egg donors to be compensated with NIS 19,000

"The Knesset's Labor, Welfare and Health Committee approved raising compensation sum to egg donors to NIS 19,000 ($5200) due to lack of donors.

"Since the bill to allow women to donate eggs in Israel was approved over a year and a half ago, only seven women had donated eggs, and were given NIS 10,000 ($2800). The Health Ministry requested to raise the compensation total in order to increase the number of donors due to severe shortage of eggs."

Budish, Cramton and Shim on The High-Frequency Trading Arms Race

Presently most stock markets, such as the New York Stock Exchange, and most futures markets, such as the Chicago Mercantile Exchange, use a market design called the continuous limit order book."Continuous" means that whoever accepts a bid or ask first gets the trade. This can create a race that doesn’t have an economic purpose. (Billions have been spent on optical fiber cables and microwave channels to shave milliseconds off how quickly traders can compare prices in NY and Chicago.) It can also make the market thinner in costly ways. (Liquidity providers have to quote wider bid-ask spreads to protect themselves against getting ‘sniped’ if there is a news event and they don’t adjust their quotes fast enough.)

An exciting market design paper documents this and suggests a solution (run a batch market every second, so that traders would have to compete on price rather than time):
The High-Frequency Trading Arms Race: Frequent Batch Auctions as a Market Design Response
by Eric Budish, Peter Cramton, and John Shim

Abstract: We propose frequent batch auctions – uniform-price double auctions conducted at frequent but discrete time intervals, e.g., every 1 second – as a market design response to the high-frequency trading arms race. Our argument has four parts. First, we use millisecond-level direct-feed data from exchanges to show that, under the continuous limit order book market design that is currently predominant, market correlations that function properly at human-scale time horizons completely break down at high frequency time horizons. Second, we show that this correlation breakdown creates purely technical arbitrage opportunities, which in turn creates an arms race to exploit such opportunities. Third, we develop a simple theory model motivated by these empirical facts. The model shows that the arms race is not only per se wasteful, but also leads to wider spreads and thinner markets for fundamental investors. Last, we use the model to show that batching eliminates the arms race, both because it reduces the value of tiny speed advantages and because it transforms competition on speed into competition on price. Consequently, frequent batch auctions lead to narrower spreads, deeper markets, and increased social welfare.
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Figure 1.1 of the paper beautifully illustrates why speed pays: it only takes milliseconds for a price movement on index futures in Chicago to be matched by a corresponding price change on the exchange-traded index fund in NY. Whoever sees that discrepancy first can earn the full arbitrage profits. (In a batch market every second, traders would have to compete for these...)

Tim Harford has a nice summary of the paper here.
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The NY Times covered a different kind of early information (seconds not milliseconds, involving survey results, not prices) in this pair of before and after stories: Thomson Reuters to Suspend Early Peeks at Key Index, Fair Play Measured in Slivers of a Second

From the second story:
"On Friday morning, Thomson Reuters released the latest University of Michigan Consumer Sentiment Index, as it does twice a month. But this time was different. As a result of a settlement Thomson Reuters reached this week with New York’s attorney general, Eric T. Schneiderman, a select group of its customers didn’t get the two-second advance release they’d been buying.
...
"The difference was arresting. On Friday, just 500 shares of a leading Standard & Poor’s 500 exchange-traded fund traded during the first 10 milliseconds of the two-second window before the release of the University of Michigan data to Thomson Reuters’ regular clients, according to the market research firm Nanex. A year ago, on July 13, 2012, 200,000 shares traded during that 10-millisecond period, Nanex said."
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I shared a draft of this post with Eric Budish, who replied as follows:

"If you wanted to hook this paper into your own work, here are some potential connections (we chatted about these connections last time I was in Stanford):
- Serial vs. batch processing: we are criticizing continuous limit order books, which process messages one-at-a-time in serial and hence induce speed races, and proposing a batch auction in its place. This reminds me of your 1997 JPE paper on serial vs. batch processing …
- Congestion: the speed race creates congestion for the exchange’s computers, which leads to a backlog in processing messages, which leads to traders being confused about the state of their orders, which creates uncertainty and occasionally bigger problems (backlog is most severe at times of especially high market activity, when reliance on low-latency information is also at its highest). We talk about this a bit in Section 8 of the paper
- Sniping: our empirical work and theory model highlight that an important cost of liquidity provision under the continuous limit order book is that liquidity providers are constantly getting “sniped” – when there is an arbitrage opportunity, such as the one you can see in Figure 1.1 of the paper, some poor liquidity provider is on the other side of that arbitrage opportunity and is losing money … he ultimately passes this cost on to fundamental investors via a wider bid-ask spread
- Thickness: continuous time is the ultimate thin market, in most dt’s there is no activity whatsoever …

Not sure that any of this is worth mentioning, but it’s fun to see all of these themes from your work coming up in so different a context."

Future of Game Theory: Stony Brook roundtable

This past week I had the opportunity to listen to a discussion of "The Present and Future of Game Theory". The highlight was a set of short talks by Aumann, Fudenberg, Kalai, and Maskin:

Robert Aumann* (Hebrew University and Stony Brook University) Overview
Drew Fudenberg (Harvard University) Predictive Game Theory
Ehud Kalai (Northwestern University) Game Theory and Computer Science
Eric Maskin* (Harvard University)  The Present and Future of Mechanism Design

Bob Aumann opens the session on the present and future of game theory

To my pleased surprise, they all seemed to see the future of game theory in applications of various kinds.

 Bob Aumann's first examples, of "hard" (as opposed to "soft") applications were from market design

Drew Fudenberg speaks about predictive game theory

 Drew focused on "predictive game theory," and the need for experiments and computational models.

Ehud Kalai speaks about game theory and computer science

Ehud Kalai spoke without slides, in front of photos of Lloyd Shapley and Jean Francois Mertens, who were honored in different ways at the conference. He spoke about how game theory and computer science are likely to become increasingly entangled in the years to come.

Eric Maskin speaks about the future of mechanism design

Eric Maskin included the fall of the planned economies of Eastern Europe among the applications of mechanism design, and also included the design of auction and matching markets.













Later in the same session I spoke about some of the differences between "game engineering" and game theory, and elaborated on the following points that I think are typical of the situation we often find ourselves in in market design:
1. We don’t know the whole game
2. We can’t compare designs just by their equilibria
3. Design solutions can’t always wait for reliable scientific knowledge
4. Market design solutions don’t last forever
5. We can’t just do the game theory, other problems have to be addressed to have a complete design

Market design conference at Lund, July 25-27

Here is the conference website: Conference on Economic Design 2013 (25-27 July)

Beforehand, The Arne Ryde Foundation will organize a two-day mini-course on Economic Design July 23-24, 2013. The course is directed towards PhD students and post-docs wanting a firm grounding in the subject and consists of four lectures on Economic Design given by leading researchers in the field (Gabrielle Demange, Bettina Klaus, Tayfun Sönmez and William Thomson).

The conference program is here.

The keynote addresses are

Murat Sertel Lecture, Date and time: July 25, 17:35-18:50
Chair: M. Utku Ünver(Department of Economics, Boston College)
Professor Tayfun Sönmez(Department of Economics, Boston College)
Kidney Exchange: Past, Present, and Potential Future

SED Lecture Date and time: July 26, 09:00-10:15
Chair: Lars Ehlers(Département de Sciences Économiques and CIREQ, Université de Montréal)
Professor William Thomson (University of Rochester, Department of Economics)
Allocation when Preferences are Single-peaked: Basic Model and New Directions

SED Lecture, Date and time: July 26, 17:20-18:35
Chair: Tommy Andersson (Department of Economics, Lund University)
Professor Paul Klemperer(Oxford University, Nuffield College)
Geometry, Auctions, and Matching

Tim Besley reviews "What Money Can't Buy" by Michael Sandel

Besley likes Sandel's book (while recognizing its flaws): Here's the opening sentence of his review in the Journal of Economic Literature(2013, 51(2), 478–495):

"Michael Sandel’s What Money Can’t Buy (WMCB hereafter) is a great book and I recommend every economist to read it even though we are not really his target audience."

I've written a bunch of blog posts about Sandel's views on markets, and others on repugnant transactions and markets, so I won't go into the details again here.

Let me instead give Besley the last word. Here are two paragraphs from his Final Remarks:

"The timing of WMCB may seem ironic in a year in which the Nobel Prize was awarded to Alvin Roth and Lloyd Shapley for their important work on market design that underpins a large expansion of exchange and matching into domains such as school choice, labor markets, and kidney exchange.
As Roth (2008) explains, the approach that he has taken is sensitive to issues of social constraints on market allocations. For example, he acknowledges that having a role for prices in kidney exchanges offends societal values. So the market design that has been proposed in this setting looks for exchanges that are feasible without prices. Thus, the concerns in WMCB are already taken on board by those who are actively promoting more socially sensitive forms of exchange.
...
"At the outset, WMCB identifies two obstacles to rethinking the role and reach of markets. One is the power and prestige of market thinking. The other is the rancor and emptiness of public discourse. Most economists will regard the first as well earned and many would gladly take a bow. But it seems hard to dispute that the need to participate in and engage with debates about markets (and governments) is a central obligation of the economics profession. WMCB is to be applauded for supplying both provocation and insight on a wide range of important topics. And it suggests
a range of challenges to which the discipline of economics can respond."


HT: Parag Pathak

From auctions to buy-it-now on eBay

eBay has changed since I started studying in the late 1990's, when it was all auctions all the time.
Here's the story:

SALES MECHANISMS IN ONLINE MARKETS:
WHAT HAPPENED TO INTERNET AUCTIONS?
by Liran Einav
Chiara Farronato
Jonathan D. Levin
Neel Sundaresan
Working Paper 19021
http://www.nber.org/papers/w19021


ABSTRACT
Consumer auctions were very popular in the early days of internet commerce, but today online sellers mostly use posted prices. Data from eBay shows that compositional shifts in the items being sold, or the sellers offering these items, cannot account for this evolution. Instead, the returns to sellers using auctions have diminished. We develop a model to distinguish two hypotheses: a shift in buyer demand away from auctions, and general narrowing of seller margins that favors posted prices. Our estimates suggest that the former is more important. We also provide evidence on where auctions still are used, and on why some sellers may continue to use both auctions and posted prices.

a pre-emptive letter of rejection from one of my favorite journals, Games and Economic Behavior

Along with what I presume are very many other people, I recently received this email from the editors of Games and Economic Behavior (GEB). The first part of the email (reproduced below) reads a lot like the rejection letters I get, and says that only papers of very broad general interest can be accepted (and not papers that are of interest to only some readers..).  But in this case the letter is being sent to people before they submit a paper. (The second part of the email sensibly encourages editors and referees to reject things quickly, at least, and use early desk rejections, so that people will still be willing to submit to a journal that is likely to reject their paper...)

"Dear GEB colleagues,

"We are writing to update you on the state of the journal, remind you of GEB's objective, ask for your help, and thank you for your contributions.

"Journals that publish papers in game theory
Currently, there are six journals devoted entirely to publishing game theory papers:
1. Games and Economic Behavior, Elsevier
2. International Journal of Game Theory, Springer
3. International Game Theory Review, World Scientific
4. International Journal of Mathematics, Game Theory and Algebra, Nova Publishers
5. Journal of Game Theory, Scientific & Academic Publishing - Open Access (Peer Review) 
6. Games, MDPI - Open Access (Peer Review) 

"In addition, most economic theory journals publish game theory papers and there is a fast growing number of game theory papers published in computer science and operations research journals. For example, one of the four sections of Mathematics of Operations Research is devoted entirely to game theory and ACM Transactions on Economics and Computation is heavily concentrated on game theory. 

"The unique role of GEB
The stated goal of GEB is to "facilitate cross-fertilization between theories and applications of game theoretic reasoning." With the expansion of game theory into a variety of subjects beyond economics (computer science, operations research and management, biology, sociology, psychology, linguistics, philosophy), it is important to communicate and coordinate game-theoretic research across these fields. To be effective in this mission, it is important to restrict publications in GEB to papers that are of general game theoretic interest (in a broad sense) and not to publish papers that are of interest only to narrow groups, even if they are high quality. With the current rate of more than 700 new submissions a year, this means that GEB has to maintain a high rate of rejection. The current rate of rejection is approximately five out of six newly submitted papers."

2013 Best paper prize to Michael Ostrovsky and Michael Schwarz for AEJ: Micro, 2 (2), "Information Disclosure and Unraveling in Matching Markets,"

A Best Paper Prize for the matching market view of grade inflation:)

AEJ: Micro, 2 (2), "Information Disclosure and Unraveling in Matching Markets," Michael Ostrovsky and Michael Schwarz

Abstract

This paper explores information disclosure in matching markets. A school may suppress some information about students in order to improve their average job placement. We consider a setting with many schools, students, and jobs, and show that if early contracting is impossible, the same, "balanced" amount of information is disclosed in essentially all equilibria. When early contracting is allowed and information arrives gradually, if schools disclose the balanced amount of information, students and employers will not find it profitable to contract early. If they disclose more, some students and employers will prefer to sign contracts before all information is revealed. 

Matching with couples in large markets: Kojima, Pathak and Roth

Fuhito Kojima, Parag Pathak and I have a paper coming out that suggests a beginning of an answer to the empirical puzzle presented by the fact that the many annual labor matching markets with couples that use the Roth-Peranson algorithm overwhelmingly find stable matchings, even though in principle they might fail to exist.  In large markets with short preference lists and without too many couples, the answer seems to be related to the fact that there remain sufficiently many unfilled positions so that vacancy chains are more likely to end than to cycle.

Here's the paper:
Kojima, Fuhito, Parag A. Pathak, and Alvin E. Roth, “Matching with Couples: Stability and Incentives in Large Markets,” April 2010, revised April 2013, Quarterly Journal of Economics, forthcoming.

Abstract: Accommodating couples has been a longstanding issue in the design of centralized labor market clearinghouses for doctors and psychologists, because couples view pairs of jobs as complements. A stable matching may not exist when couples are present. This paper's main result is that a stable matching exists when there are relatively few couples and preference lists are sufficiently short relative to market size. We also discuss incentives in markets with couples. We relate these theoretical results to the job market for psychologists, in which stable matchings exist for all years of the data, despite the presence of couples.