Recent NBER papers bearing on market design

Here are three:

The Effects of Mandatory Transparency in Financial Market Design: Evidence from the Corporate Bond Market

Paul Asquith, Thom Covert, Parag Pathak

NBER Working Paper No. 19417
Issued in September 2013
NBER Program(s):   AP   CF 

Many financial markets have recently become subject to new regulations requiring transparency. This paper studies how mandatory transparency affects trading in the corporate bond market. In July 2002, TRACE began requiring the public dissemination of post-trade price and volume information for corporate bonds. Dissemination took place in Phases, with actively traded, investment grade bonds becoming transparent before thinly traded, high-yield bonds. Using new data and a differences-in-differences research design, we find that transparency causes a significant decrease in price dispersion for all bonds and a significant decrease in trading activity for some categories of bonds. The largest decrease in daily price standard deviation, 24.7%, and the largest decrease in trading activity, 41.3%, occurs for bonds in the final Phase, which consisted primarily of high-yield bonds. These results indicate that mandated transparency may help some investors and dealers through a decline in price dispersion, while harming others through a reduction in trading activity.

The Impact of the Internet on Advertising Markets for News Media

Susan Athey, Emilio Calvano, Joshua Gans

NBER Working Paper No. 19419
Issued in September 2013
NBER Program(s):   IO   PR 

In this paper, we explore the hypothesis that an important force behind the collapse in advertising revenue experienced by newspapers over the past decade is the greater consumer switching facilitated by online consumption of news. We introduce a model of the market for advertising on news media outlets whereby news outlets are modeled as competing two-sided platforms bringing together heterogeneous, partially multi-homing consumers with advertisers with heterogeneous valuations for reaching consumers. A key feature of our model is that the multi-homing behavior of the advertisers is determined endogenously. The presence of switching consumers means that, in the absence of perfect technologies for tracking the ads seen by consumers, advertisers purchase wasted impressions: they reach the same consumer too many times. This has subtle effects on the equilibrium outcomes in the advertising market. One consequence is that multi-homing on the part of advertisers is heterogeneous: high-value advertisers multi-home, while low- value advertisers single-home. We characterize the impact of greater consumer switching on outlet profits as well as the impact of technologies that track consumers both within and across outlets on those profits. Somewhat surprisingly, superior tracking technologies may not always increase outlet profits, even when they increase efficiency. In extensions to the baseline model, we show that when outlets that show few or ineffective ads (e.g. blogs) attract readers from traditional outlets, the losses are at least partially offset by an increase in ad prices. Introducing a paywall does not just diminish readership, but it furthermore reduce advertising prices (and leads to increases in advertising prices on competing outlets).

Privacy and Data-Based Research

Ori Heffetz, Katrina Ligett

NBER Working Paper No. 19433
Issued in September 2013
NBER Program(s):   AG   LS   PE 

What can we, as users of microdata, formally guarantee to the individuals (or firms) in our dataset, regarding their privacy? We retell a few stories, well-known in data-privacy circles, of failed anonymization attempts in publicly released datasets. We then provide a mostly informal introduction to several ideas from the literature on differential privacy, an active literature in computer science that studies formal approaches to preserving the privacy of individuals in statistical databases. We apply some of its insights to situations routinely faced by applied economists, emphasizing big-data contexts.

Matching couples, in the QJE

Our paper on couples has appeared online at the QJE: MATCHING WITH COUPLES: STABILITY AND INCENTIVES IN LARGE MARKETS

Here are the links on Parag Pathak's page, including the links to the original working paper which has some material absent from the published version.

Kojima, Fuhito, Parag A. Pathak, and Alvin E. Roth, 
Matching with Couples: Stability and Incentives in Large Markets 
(Appendix, Computer Programs, older version NBER 16028 with statement and proof of Thm 2)

Quarterly Journal of Economics, 2013, 128(4)


I blogged about it earlier here.

Here's the abstract:

Accommodating couples has been a long-standing 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 article’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. 

Jeff Ely thinks deeply about dating mechanisms, and beliefs

The convention in 'speed dating' is that everyone is asked who they would like to meet again, and only if you and someone else both indicate each other are you given one another's contact information so that you can arrange a date.  This has a lot of good features, but it does mean that if you indicate you would like to go on a date with someone and you don't get their contact info, you learn that they didn't want to go on a date with you (which you might have preferred not to know).

Here's Jeff over at Cheap Talk, thinking about alternative mechanisms before settling on the familiar one:

First you are asked whether you would like to hook up with your friend. Then you are asked whether you believe your friend would like to hook up with you. These are just setup questions. Now come the important ones. Assuming your friend would like to hook up with you, would you like to know that? Assuming your friend is not interested, would you like to know that? And would you like your friend to know that you know?

Assuming your friend is interested, would you like your friend to know whether you are interested? Assuming your friend is not interested, same question. And the higher-order question as well.

These questions are eliciting your preferences over you and your friend’s beliefs about (beliefs about…) you and your friend’s preferences. This is one context where the value of information is not just instrumental (i.e. it helps you make better decisions) but truly intrinsic. For example I would guess that for most people, if they are interested and they know that the other is not that they would strictly prefer that the other not know that they are interested. Because that would be embarrassing.

And I bet that if you are not interested and you know that the other is interested you would not like the other to know that you know that she is interested. Because that would be awkward.

Notice in fact that there is often a strict preference for less information. And that’s what makes the design of a matching mechanism complicated.  Because in order to find matches (i.e. discover and reveal mutual interest) you must commit to reveal the good news. In other words, if you and your friend both inform the experimenters that you are interested and that you want the other to know that, then in order to capitalize on the opportunity the information must be revealed.

But any mechanism which reveals the good news unavoidably reveals some bad news precisely when the good news is not forthcoming. If you are interested and you want to know when she is interested and you expect that whenever she is indeed interested you will get your wish, then when you don’t get your wish you find out that she is not interested.

Fortunately though there is a way to minimize the embarrassment. The following simple mechanism does pretty well. Both friends tell the mediator whether they are interested.  If, and only if, both are interested the mediator informs both that there is a mutual interest. Now when you get the bad news you know that she has learned nothing about your interest. So you are not embarrassed.

However it doesn’t completely get rid of the awkwardness. When she is not interested she knows that *if* you are interested you have learned that she is not interested. Now she doesn’t know that this state of affairs has occurred for sure. She thinks it has occurred if and only if you are interested so she thinks it has occurred with some moderate probability. So it is moderately awkward. And indeed you know that she is not interested and therefore feels moderately awkward.

The theoretical questions are these:  under what specification of preferences over higher-order beliefs over preferences is the above mechanism optimal? Is there some natural specification of those preferences in which some other mechanism does better?

Update: Ran Spiegler points me to this related paper.

The Handbook of Market Design

The Handbook of Market Design, from Oxford University Press, is out (it's been printed), and should be available by the time you read this.

Here's the Table of Contents:

You could place your order here:)

Course allocation at U. Toronto

U of T students trade cash for seats in full classes

University of Toronto students are buying and selling spots in fully-booked courses, turning registration into a bidding war.

“$100 to whomever drops (History of Modern Espionage),” posted Christopher Grossi on Facebook Tuesday. “I really need this course.”

The third-year history student said the 180-person course filled up before his designated registration time. After talking to the professor without success, he said offering money was his last chance to coax someone to trade with him.

The university’s course registration system prioritizes students based on need and creates a wait list for full classes, said Glenn Loney, assistant dean and faculty registrar of the university’s Faculty of Arts and Science.

But there is a narrow window of opportunity in the days after the wait list closes and before the final deadline for students to add or drop courses.

“Once the university drops the wait list, it’s mostly just every man for themselves,” Grossi said.

Some students have taken to Facebook to name a price for their coveted seat. In a post earlier this week, one student offered to sell her spots in two psychology courses for $50 apiece — or she’ll swap for a space in another psychology class.

Third-year computer science student “Lee,” who would not give his full name for fear of repercussions by the university, said he has sold his spot in courses twice, for $20 each. After arranging the deal through the university’s internal email system, Lee met the buyer in the library. On the university’s registration website, Lee dropped the course and the buyer applied for it immediately afterward, snagging Lee’s newly vacated spot.

Loney said students have been swapping spots in courses for years and there are no rules against it.

“There’s nothing that would put it in the same league as cheating, or an academic advantage,” he said, adding there is a limit to the number of courses a student can enrol in to prevent someone from stocking up on courses with the intent to sell.

Where arrangements were once made through friends, social media has created a much larger marketplace to connect desperate buyers with enterprising sellers.

“Most students find it reprehensible, and don’t participate in it at all,” Loney said. “There’s usually a torrent of abuse heaped on the people who are trying to sell.”

New Orleans School Choice in the WSJ

 School choice in New Orleans is the subject of this WSJ story, which focuses on the search for good school places, and how choice helps...

Inside the Nation's Biggest Experiment in School Choice

"Denver, Chicago and Cleveland have embraced school choice on a smaller scale, but none give as much freedom—to parents and campuses—as New Orleans does: About 84% of its 42,000 public school students attend charters, the largest share of any district in the U.S."

Unravelling in the Business School job market

The WSJ has a video report

Here's the caption: 

Top B-School Talent Plucked Before Class Starts

Schools try to restrict when companies can start coming to campus. But that doesn’t limit what companies try to do off-campus, and it’s not uncommon for students to show up at orientation with internship offers for next summer in hand.

HT: Jon Levin

MOOCS: massive online certifiers

There's an increasing move among companies that offer MOOCs, Massive Online Courses, to also offer certification.  This may be where the money is.

e.g. this from the WSJ: Job Market Embraces Massive Online Courses--Seeking Better-Trained Workers, AT&T, Google and Other Firms Help Design and Even Fund Web-Based College Classes

""The common denominator [among the new MOOC certification programs] is that there really is an interest in finding credentials that don't require a student to buy the entire degree," said Sebastian Thrun, the Stanford University computer-science professor who co-founded Udacity, a MOOC with 1.6 million enrolled students in 200 countries. "This is really democratizing education at its best."

Organ donation registration on college applications, in India

Here's the story: Governor tells V-Cs to offer option for organ donation in college admission forms

"In a meeting held recently, the governor had urged the V-Cs to offer a separate column in the college admission forms for organ donation. T C Benjamin, Additional Chief Secretary (public health) said filling the column is not mandatory and students will have the choice. The state had made it a must for hospitals to inform the organ transplant centres about brain-dead patients. "

Further unraveling of (combined) college and medical school admissions

Shenendehowa to offer early medical school acceptance

"CLIFTON PARK — A new program that may be the first of its kind in the nation will allow one medicine-minded Shenendehowa High School student to get accepted to college and medical school early — a few months before the junior prom.

"More than a year before classmates know where they’re going after graduation, one student who undergoes a rigorous application process will be accepted into Siena College’s and Albany Medical College’s combined eight-year physician program. On Thursday, officials from the school district and both colleges announced the program — “ShenNext Medicine: Selecting Tomorrow’s Doctors Today.”

"They believe the program is the first in the country to admit a student as a junior, though many institutions have partnerships that accept high school seniors to undergraduate colleges and medical schools at the same time. Siena and Albany Medical College have had such a partnership for 27 years, and Albany Med has similar programs with Union College and Rensselaer Polytechnic Institute.

"Juniors in the Shen program still have to complete their senior year and maintain good grades."

HT: Mary O'Keeffe

Study mechanism design online with Jason Hartline

Jason Hartline writes:

Please share the following announcement:

   *** Online Self-study on Mechanism Design and Approximation  ***

   Web: http://www.eecs.northwestern.edu/hartline/courses/mdna.html

   Discussion: https://piazza.com/northwestern/fall2013/eecs499/home

   To enroll: go to course page on Piazza and enroll as a student.

Synopsis. This course is a self-study course based on the manuscript "Mechanism Design and Approximation" which is based on a graduate course that has been developed at Northwestern over the past five years. Over the fall quarter we will work through roughly one chapter per week. The week will start with students reading and discussing the material of the chapter and it will conclude with students working together to solve and write up solutions to the chapter exercises.  The textbook is in final draft and your comments and suggestions will help improve the book for future students.

Excerpt from Chapter 1: Our world is an interconnected collection of economic and computational systems. Within such a system, individuals optimize their actions to achieve their own, perhaps selfish, goals; and the system combines these actions with its basic laws to produce an outcome. Some of these systems perform well, e.g., the national residency matching program which assigns medical students to residency programs in hospitals, e.g., auctions for online advertising on Internet search engines; and some of these systems perform poorly, e.g., financial markets during the 2008 meltdown, e.g., gridlocked transportation networks. The success and failure of these systems depends on the basic laws governing the system. Financial regulation can prevent disastrous market meltdowns, congestion protocols can prevent gridlock in transportation networks, and market and auction design can lead to mechanisms for allocating and exchanging goods or services that yield higher profits or increased value to society.

This text focuses on a combined computational and economic theory for the study and design of mechanisms. A central theme will be the tradeoff between optimality and other desirable properties such as simplicity, robustness, computational tractability, and practicality. This tradeoff will be quantified by a theory of approximation which measures the loss of performance of a simple, robust, and practical approximation mechanism in comparison to the complicated and delicate optimal mechanism. The theory provided does not necessarily suggest mechanisms that should be deployed in practice, instead, it pinpoints salient features of good mechanisms that should be a starting point for the practitioner.

Market Design conference(s) in June at Stanford

Scott Page sends the following email announcement:

Dear All,

I have exciting news about the 2014 NSF/CEME Decentralization Conference.

- It will take place on June 8-9, 2014 in Palo Alto, California.

- Fuhito Kojimo of Stanford University will be the local organizer.

- The conference will be collocated with two other major mechanism design conferences: the NBER Market Design Conference and the ACM Conference on Economics and Computation.  The conferences will run sequentially with overlapping plenary sessions, with the Decentralization Conference running for the first two days, followed by the Market Design Conference and then ACM.

- Participants are encouraged to attend all three conferences and to bring graduates students.

-  We will be sending out an official call for papers in about a month.

I think this will be an incredible opportunity to bring together three communities that look at similar questions and use similar tools.  I recognize that the June date is later than our typical March or April meeting, and apologize for any inconvenience this might cause.  

Here is the “official” announcement from Susan Athey, David Parkes and myself.  Please feel free to forward this email to anyone who might be interested.

         ACM, Market Design and Decentralization Conference

                                    June 8 -12, 2014

  Palo Alto, CA

The ACM Conference on Economics and Computation (EC'14), the NBER Market Design Conference, and the NSF/CEME Decentralization Conference will collocate this June at Stanford University.  The jointly run conferences will include both joint and independent sessions to facilitate greater interactions across the three research communities.  The joint sessions will include invited keynote presentations by leaders in the fields of incentives, market design, computation, and decentralization. Proposals for presentations in the independent sessions should be submitted following the procedures of each individual conference.  Individuals who normally participate in one of the conferences are strongly encouraged to also attend the other conferences so as to build a more interdisciplinary community of scholars interested in common topics.

Why it's hard to get hot restaurant reservations or concert tickets (and why concierges sometimes can)

It turns out you need professional gear to get some reservations: the New Statesman has a report from the front.

The Bot Wars: why you can never buy concert tickets online

Enterprising programmers are creating bots that can reserve, and in some cases buy, everything from restaurant tables to eBay goods before humans can even get a look in. Where will the bot wars end?

"Just as high frequency trading, via automated software, took over the financial markets in the early 2000s, the use of bots is a technique that is increasingly coming to dominate online sales of all stripes."
*********
Some of my earlier posts on this subject here,  here and here  focused on concert tickets and professional re-sellers (scalpers) who sometimes skirt the law.


HT: Dean Jens

Matching of cases to federal judges

From The Federal Judicial Center's page on How the Federal Courts Are Organized FAQ:

How are cases assigned to judges? 
Each court with more than one judge must determine a procedure for assigning cases to judges. Most district and bankruptcy courts use random assignment, which helps to ensure a fair distribution of cases and also prevents "judge shopping," or parties’ attempts to have their cases heard by the judge who they believe will act most favorably. Other courts assign cases by rotation, subject matter, or geographic division of the court. In courts of appeals, cases are usually assigned by random means to three-judge panels.

Some other interesting Qs and As:

What is an Article III judge?
The U.S. Supreme Court, the federal courts of appeals and district courts, and the U.S. Court of International Trade are established under Article III of the Constitution. Justices and judges of these courts, known as Article III judges, exercise what Article III calls "the judicial power of the United States."

Are there judges in the federal courts other than Article III judges?
Bankruptcy judges and magistrate judges conduct some of the proceedings held in federal courts. Bankruptcy judges handle almost all bankruptcy matters, in bankruptcy courts that are technically included in the district courts but function as separate entities. Magistrate judges carry out various responsibilities in the district courts and often help prepare the district judges’ cases for trial. They also may preside over criminal misdemeanor trials and may preside over civil trials when both parties agree to have the case heard by a magistrate judge instead of a district judge. Unlike district judges, bankruptcy and magistrate judges do not exercise "the judicial power of the United States" but perform duties delegated to them by district judges. The judges on the U.S. Court of Federal Claims are also not Article III judges. Their court is a special trial court that hears mostly claims for money damages in excess of $10,000 against the United States. With the approval of the Senate, the President appoints U.S. Court of Federal Claims judges for fifteen-year terms. 

How many federal judges are there?Congress authorizes a set number of judge positions, or judgeships, for each court level. Since 1869, Congress has authorized 9 positions for the Supreme Court. It currently authorizes 179 court of appeals judgeships and 678 district court judgeships.(In 1950, there were only 65 court of appeals judgeships and 212 district court judgeships.) There are currently 352 bankruptcy judgeships and 551 full-time and part-time magistrate judgeships. It is rare that all judgeships are filled at any one time; judges die or retire, for example, causing vacancies until judges are appointed to replace them. In addition to judges occupying these judgeships, retired judges often continue to perform some judicial work.

And elsewhere on the site, this:

Law Clerks

The practice of hiring a recently graduated law student to serve as an in-chambers judicial assistant was pioneered by Horace Gray. Both as the chief justice of the Supreme Judicial Court of Massachusetts (1864–1881) and as an associate justice of the Supreme Court of the United States (1882–1902), Gray personally paid an assistant, whom he referred to as his “secretary.” Other justices of the Supreme Court followed the practice in the late-nineteenth and early-twentieth centuries. Although Congress in 1886 heeded the advice of the U.S. Attorney General that it pay for each of the justices to hire a stenographer “to assist in such clerical work as might be assigned to him,” it was not until 1919 that it provided funding for the hiring of legally trained assistants. To distinguish these assistants from the stenographers, Congress designated them as “law clerks.”

The early law clerks, most of whom were graduates of the Harvard Law School, conducted legal research, checked citations, and performed a wide range of personal and administrative tasks for their judges. Despite the concerns expressed by some members of the Judicial Conference that such assistance was unnecessary or that highly paid law school graduates were not needed to perform such tasks, Congress in 1930 provided funds for each circuit court of appeals judge to appoint a law clerk. Six years later, Congress authorized up to thirty-five district court judges to appoint law clerks, as long as the senior circuit judge of the circuit in which the district was located issued a certificate of need. A statute of 1945 lifted the restriction on the number of district court judges allowed to appoint a clerk. The certificate of need requirement continued until 1959, when Congress authorized judges to hire “necessary” law clerks subject to the limits of their chambers staff budgets and to the minimum law clerk salary provisions of the Judicial Salary Plan.

As federal judicial caseloads and budgets increased during the last four decades of the twentieth century, the number of law clerks retained by the judges of the federal courts rose steadily, though some judges have eschewed the practice of hiring short term law clerks in favor of “career” clerks, who are hired with the expectation that they will serve for a period of more than four years. Today’s law clerks typically perform quasi-judicial functions, such as preparing bench memoranda on legal issues and composing drafts of judicial opinions.

Further Reading:
Baier, Paul R. “The Law Clerks: Profile of an Institution,” Vanderbilt Law Review 26 (1973): 1125–77.
Newland, Chester A. “Personal Assistants to Supreme Court Justices: The Law Clerks,” Oregon Law Review 40 (1961): 299–317.
“Law Clerks: The Transformation of the Judiciary,” Long Term View: A Journal of Informed Opinion 3 (1995).

My freshman seminar and Ph.D. class on matching: Fall 2013

ECON 26N: Who gets what? The New Economics of Matchmaking and Market Design

Freshman Seminar. What are markets and marketplaces? How do they work? How do they fail? How can we fix them when they¿re broken? Recently economists have become market designers to try to answer these questions. What are matching markets and why are they important? This seminar will explore examples of matching markets such as; who goes to which schools and universities? Who gets which jobs? Who gets scarce organs for transplant? Who marries whom? We'll investigate examples of recent market designs in school choice, labor markets and kidney exchange. How internet dating sites and social networking might make courtship very different for your generation than it was previous ones.

Terms: Aut | Units: 3 | UG Reqs: WAY-SI | Grading: Letter (ABCD/NP)

Instructors: Roth, A. (PI)

Schedule for ECON 26N

ECON 285: Matching and Market Design

This is an introduction to market design, intended mainly for second year PhD students in economics (but also open to other graduates students from around the university and to undergrads who have taken undergrad market design). It will emphasize the combined use of economic theory, experiments and empirical analysis to analyze and engineer market rules and institutions. In this first quarter we will pay particular attention to matching markets, which are those in which price doesn¿t do all of the work, and which include some kind of application or selection process. In recent years market designers have participated in the design and implementation of a number of marketplaces, and the course will emphasize the relation between theory and practice, for example in the design of labor market clearinghouses for American doctors, and school choice programs in a growing number of American cities (including New York and Boston), and the allocation of organs for transplantation. Various forms of market failure will also be discussed. Assignment: One final paper. The objective of the final paper is to study an existing market or an environment with a potential role for a market, describe the relevant market design questions, and evaluate how the current market design works and/or propose improvements on the current design.

Terms: Aut | Units: 2-5 | Grading: Letter or Credit/No Credit

Instructors: Niederle, M. (PI) ; Roth, A. (PI)

Schedule for ECON 285

Nobel monument inscription ceremony: Columbus Ave and W. 81st Street tomorrow

I'll be teaching in California and unable to attend, but if you are near the Museum of Natural History at 5PM tomorrow, Sept 23, you could see what is apparently "the only monument in New York City parks which features the names of living persons"
"Every year, the names of the American Nobel Laureates from the previous year are inscribed onto the monument and unveiled at an annual ceremony."

The event will be in Theodore Roosevelt Park, adjacent to the American Museum of Natural History. The invitation letter says "This is the location of the Nobel Monument, raised in 2003 to honor Alfred Nobel and all American recipients of the Nobel Prize, who along with you now number 332."

**********

I was in NYC on 5/17/2014 and took a walk with Itai Ashlagi and Jacob Leshno to see the monument.
(There aren't so many opportunities to see your name in stone:)

Golden Goose Award, postscript (and video)

The Golden Goose Award was fun, in a circle the wagons kind of way, since the Congressmen who support federal funding of science are clearly feeling beleaguered.  Of course it's not just science funding that is under pressure these days: here's the NY Times headline for a vote that took place at the same time as the awards ceremony (so that Congressmen came to the ceremony then ducked out to vote and then returned to tell us about the difficulties they face): House Republicans Pass Deep Cuts in Food Stamps 

But it was an upbeat meeting, and there was a video made from interviews done beforehand, about how basic research is a good investment.  The (8 minute) video starts with the part of the award given to me, David Gale and Lloyd Shapley, and the speakers are me and Joel Sobel at UCSD who was a student of Gale's. Here it is on vimeo: Golden Goose Awards 2013 video

Different places have different cultures, and the modest luncheon we attended before the ceremony was a buffet, I gather in order to allow the members of Congress who joined us to keep within the limits set by the Ethics committee: Food or Refreshments of a Nominal Value (Attendance at Receptions)

Here's my pre-ceremony post on the GG event

Conflicts of interest in caring for candidates for kidney transplants

Harvey Mysel has posted the following (reproduced in its entirety) here:

How Conflicts of Interest Negatively Impacts a Patients Chance to have a Kidney Transplant

Patients who need a kidney transplant expect their dialysis clinic and/or their transplant hospital to provide them with information on the best medical options available. CMS (Centers for Medicare and Medicaid Services) requires dialysis companies and transplant hospitals to provide this information. These companies may “technically” abide by these rules however, the information is often vague and not very useful.

The Conflict for Dialysis Companies
CMS requires dialysis companies to ask: “Has the patient been informed of kidney transplant options?” A Yes/No box needs to be checked. A dialysis company’s mission is to dialyze patients, not to educate them about kidney transplants. It’s a conflict of interest for the dialysis company. Once a patient receives a kidney transplant, they don’t need the services of the dialysis company. What company will educate their customer to an option that will result in losing their customer?

From the statistics you can see there is a problem in the dialysis community. There are over 400,000 people on dialysis but only 98,000 are on the kidney transplant waiting list. By some estimates, 10% of all dialysis patients die every year. Many dialysis patients were good candidates for a kidney transplant when they first started dialysis, but after years of treatments their health deteriorates and the majority is no longer healthy enough to recover from a kidney transplant.

The Conflict for Transplant Hospitals
CMS requires transplant hospitals to tell their patients they can register at more than one transplant hospital. The primary reason to register at another transplant hospital is to be on a shorter waiting list. Providing this information to their patients is a conflict of interest for the hospital. A hospital might tell their patients they could register somewhere else, without letting them know the benefit of doing so. There are regions in the U.S. where the wait for a deceased donor kidney is 5-­-10 years, while in another area, which might only be a 1.5 hour drive, the wait time is only 12 months.

There’s another conflict that can develop for the transplant hospital. Patients are given excellent advice and encouraged to find a living kidney donor. There are many benefits of a living donor kidney versus one from a deceased donor.

The biggest benefit is a kidney from a living donor lasts on average twice as long as one from a deceased donor. Statistics show about one-­-third of all potential donors who are evaluated are not compatible with their intended recipient. Potential donors could have an incompatible blood type or the recipient has certain antibodies, also referred to as being sensitized that will result in rejecting this person’s kidney. High levels of antibodies can develop as a result of a previous transplant, a blood transfusion or for some women giving birth.

Better anti-­-rejection drugs and Kidney Paired Donations (KPD) also called paired exchanges, chains or swaps allow these incompatible donors to help their intended recipient by donating to another recipient who also has an incompatible donor. KPDs have the potential of adding thousands of kidney transplants a year if a centralized national program is developed and all incompatible pairs are registered in the same pool. Unfortunately there isn’t one centralized program, but many different KPD options. To read more about KPDs go to: www.lkdn.org/LKDN_Paired_Exchanges.pdf

Since there are many KPD programs, the likelihood of being matched with another incompatible pair is increased when you join other KPD programs. It’s a numbers game. There are exceptions to this, if there are many pairs with rare blood types or when a pool contains many difficult pairs to match due to the recipient being sensitized. To read more about the paired exchange conundrum go to:http://www.lkdn.org/LKDN_The_Paired_Exchange_Conundrum.pdf

Here’s the conflict. Hospitals are under no obligation to tell their incompatible pairs about the benefits of registering with other KPD programs. This could result in a patient going to another hospital to receive a transplant. What company will educate their customer to an option that will result in losing their customer?

Kidney dialysis and kidney transplants are very profitable for these institutions. It costs approximately $83,000 a year to provide dialysis services for one patient and a kidney transplant can generate approximately $125,000 for a hospital.

What could be done to help patients understand their options and remove these conflicts of interest?

For the dialysis companies, CMS could authorize an independent company to educate the dialysis patients about kidney transplants. There’s no shortage of organizations that are qualified to provide these services.

For the transplant hospitals, CMS and/or UNOS could also authorize an independent company to educate patients about registering at other transplant hospitals and include the options patients have when a potential donor is incompatible.

A kidney transplant, whether from a deceased or living donor is a life changing and complicated process. Patients who are in need of a kidney transplant need much more help in understanding the options available to them.

Harvey Mysel is a two-­-time kidney transplant recipient and Founder of LKDN (Living Kidney Donors Network) a nonprofit organization that offers workshops and webinars to educate people in need of a kidney transplant about living kidney donation. LKDN also helps prepare those in need to effectively communicate their situation to family members and friends. LKDN’s website is www.lkdn.org and Harvey can be reached atharvey@lkdn.org

For a printable copy, click here.

David Gale and Lloyd Shapley and I share the Golden Goose Award

Today I'm in Washington DC to accept The Golden Goose Award made jointly to me, to Lloyd Shapley, who won't be able to attend, and to the late David Gale, whose death kept him from the Nobel celebration of his work with Shapley last December.

As I understand it, the award is for funny sounding  ("seemingly obscure," "wacky title," "left field") research that was supported by federal funds and eventually proved to be useful:

ABOUT THE GOLDEN GOOSE AWARD

What: The purpose of the “Golden Goose” award is to demonstrate the human and economic benefits of federally funded research by highlighting examples of seemingly obscure studies that have led to major breakthroughs and resulted in significant societal impact.  Such breakthroughs include development of life-saving medicines and treatments; game-changing social and behavioral insights; and major technological advances related to national security, energy, the environment, communications, and public health. Such breakthroughs may also have resulted in economic growth through the creation of new industries or companies.

Congressman Jim Cooper (D-TN) originally conceived of the Golden Goose award as a means of educating Members of Congress and the general public about the value of federal funding of basic scientific research. The name of the award is a play on the “Golden Fleece” awards issued between 1975 and 1988 by Senator William Proxmire (D-WI), which targeted specific federally funded research grants as examples of government waste. The name also alludes to the fable of the goose that laid the golden eggs. Researchers who have used federal funding to make their research breakthroughs constitute the “goose,” and the innovations stemming from their work are the “golden eggs.” The Golden Goose Award explicitly links the two.

Who: The Golden Goose Awards will be announced three to four times a year, with an annual awards event in Washington to honor awardees. Honorees will be selected from a pool of potential nominees developed by a partnership of founding universities, think tanks, and businesses led by the American Association for the Advancement of Science, the Association of American Universities, the Association of Public and Land-grant Universities, the Breakthrough Institute, the Progressive Policy Institute, The Science Coalition, the Task Force on American Innovation, and United for Medical Research. The criteria for selecting awardees are:

• Nominees must have received a federally funded research grant within the past 60 years that contributed to an important discovery or breakthrough (Grant agencies include, but are not limited to, the National Institutes of Health, the National Science Foundation, and the Departments of Defense, Agriculture, and Energy.);
• Nominees’ research must already have led to demonstrable, significant human and economic benefits (the Golden Goose Award is not intended to honor current research that might lead to breakthroughs in the future);
• Research teams are eligible to receive a nomination for their work;
• Individuals may be nominated for their work posthumously, but only if an individual or organizational representative is available to accept the award at an event;

“We’ve all read stories about the study with the wacky title, the research project from left field,” Rep. Cooper said. “But off-the-wall science yields medical miracles. We can’t abandon research funding only because we can’t predict how the next miracle will happen.”


This is only the second time the award is being given, and this year's awards will go to Dr. John Eng, whose study of the poisonous venom produced by the Gila monster led to a drug helps treat diabetes, to microbiologist Thomas Brock and glycobiologist Hudson Freeze for their studies of bacteria that thrive in very hot water that yielded a key to the technology of the polymerase chain reaction,  and to David and Lloyd and me. Here's the announcement about our part of the prize, which mentions the funding we received from the NSF and the ONR.

AWARDEES: Alvin Roth, David Gale, Lloyd Shapley

SCIENCE:Market Design 

FEDERAL FUNDING AGENCY: Office of Naval Research, National Science Foundation

The part of the work that I'm being honored for is in fact a team effort: I've been lucky in my colleagues (Utku Unver and Tayfun Sonmez are named in the press release, and some of the others are shouted out to here).

I think the part of our work that is mentioned and that best fits the storyline of "obscure research makes good" is the line that begins with the 1974 paper by Shapley and Scarf in the first issue of the Journal of Mathematical Economics. They proposed a model of exchange of an indivisible good, without the use of money, and called the goods "houses." Since we are obviously able to use money to buy houses (I just bought one and can testify that it cost money), this was funny-sounding research that might have attracted the ire of Senator Proxmire. But playing with toy models is how economic theory gets ready to deal with unanticipated problems. They introduced Gale's top trading cycle algorithm (ttc), which Andy Postlewaite used to further explore the model in a 1977 paper. In a 1982 paper I showed that ttc makes it a dominant strategy for players to reveal their true preferences. Atila Abdulkadiroglu and Sonmez later generalized the mechanism in ways that, when it came time to organize kidney exchange, made it easy to propose that it be organized in a ttc way involving cycles and chains, with the dominant strategy property being an important piece of the puzzle. Whilettc isn't how we eventually helped organize kidney exchange (we had to start with just pairwise exchanges for logistical reasons), the practice of kidney exchange has been evolving in the direction of cycles and (long) chains, in ways that Itai Ashlagi and our surgical colleagues have been working to understand and build upon.  So, what started with a model of exchanging houses without money has evolved into exchanging kidneys in a way that's become a standard part of transplantation in the U.S. in the last few years.

This is an opportunity to remind Congress and the public of the importance of investigator-initiated, peer reviewed research.  Go NSF! (NSF posts on kidney exchange are here and here.)

If you're a fan of science as a public good, you might be glad to know if your congressman is one of those involved:

What Members of Congress are endorsing the Golden Goose Award?

Rep. Jim Cooper (D-TN)

Rep. Jason Altmire (D-PA)

Rep. Charlie Dent (R-PA)

Rep. Robert Dold (R-IL)

Rep. Rush Holt (D-NJ)

Rep. Paul Tonko (D-NY)

Fires and the market for fire fighters

We are winning our ancient battle against fire: it turns out that fighting fires with fire fighters, and with fire-resistant construction is working, and big urban fires are becoming increasingly rare.  Leon Neyfakh of the Boston Globe has the story.

Plenty of firefighters, but where are the fires? As ‘emergency’ changes its meaning, some critics are arguing it’s time to revisit a century-old system

"as a recent Globe story reported, city records show that major fires are becoming vanishingly rare. In 1975, there were 417 of them. Last year, there were 40. That’s a decline of more than 90 percent. A city that was once a tinderbox of wooden houses has become—thanks to better building codes, automatic sprinkler systems, and more careful behavior—a much less vulnerable place.

As this has happened, however, the number of professional firefighters in Boston has dropped only slightly, from around 1,600 in the 1980s to just over 1,400 today. The cost of running the department, meanwhile, has increased by almost $43 million over the past decade, and currently stands at $185 million, or around 7.5 percent of the city’s total budget.
...
"FIRE USED TO routinely devastate America’s towns and cities. It wiped out almost all of Detroit in 1805, a vast swath of Chicago in 1871, and much of Boston’s downtown in 1872. Boston, as it happens, was the site of the first volunteer firefighting force in the New World: A group of about 20 neighbors who pledged in 1718 to protect one another’s homes as part of a so-called Mutual Fire Society. More formal volunteer organizations started cropping up after 1736, when Benjamin Franklin founded the Union Fire Company in Philadelphia. Before long, many American cities were home to multiple volunteer fire crews, which competed to be first on the scene to collect bonuses from local governments and insurance companies. According to historians, these bonuses ultimately proved to be the undoing of the volunteer firefighter movement. By the mid-19th century, street brawling between rival companies became so common that cities started shutting them down and replacing them with professional, municipally operated fire departments."

Gibson Lecture at Queen's University in Kingston Ontario

I'll be speaking today at Queen's University in Kingston

What have we learned from market design? 

Tuesday, September 17, 2013
4:30 PM 

Grant Hall, Queen's University
43 University Avenue, Kingston, ON

**Light refreshments to follow:  Room 145 Robert Sutherland Hall, 138 Union Street

ALL ARE WELCOME

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2012 Nobel Laureate
Alvin Roth

Alvin Roth is the Craig and Susan McCaw Professor of Economics at Stanford University. Roth has made important contributions in many fields of economics, including axiomatic bargaining theory and experimental economics, but his contributions in matching and market design have been especially highly regarded, as exemplified by the Nobel Prize in 2012, which was awarded to him together with Lloyd Shapley. Prof. Roth has been involved in the design of the National Resident Matching Program for U.S. doctors, school choice systems in New York City and Boston, the New England Program for Kidney Exchange and the Market for Gastroenterology Fellows. He is a Sloan fellow, a Guggenheim fellow, a fellow of the American Academy of Arts and Sciences, a fellow of the Econometric Society and a faculty research fellow at the National Bureau of Economic Research.  

Abstract:

The talk will address recent developments in market design, focusing particularly on kidney exchange, which has begun to flourish in Canada as well as the United States. It will also cover some general lessons that market design teaches us about markets and marketplaces. Finally, the talk will address how some transactions (like selling organs for transplantation) are regarded as repugnant, despite the fact that there are people willing to engage in them.

The market for medical schools...

...is the subject of this Bloomberg news story by Janet Lorin, that focuses on for-profit Caribbean medical schools: DeVry Lures Medical School Rejects as Taxpayers Fund Debt 

On the one hand, those schools offer a path towards a medical career to students who are not admitted to American schools. On the other hand, that path can be risky and debt-ridden, and changes the model by which students get clinical experience to one in which for-profit schools pay hospitals to take their students on 'clerkship' rotations.

The article focuses this and federal loan guarantees.

"DeVry’s pay-for-play model has drawn the ire of the American Medical Association. In June, the state of Texas passed a law prohibiting foreign medical schools from sending students to the state.
Congress needs to examine the law that makes foreign for-profit medical schools eligible for federal loans, says Senator Dick Durbin, a Democrat from DeVry’s home state of Illinois.
“These schools are taking advantage of an offshore loophole that allows federal funding to be released to students attending a medical school that is not accredited in the U.S.,” Durbin says. “Until Congress acts, these schools will stop at nothing to keep the American taxpayer dollars flowing.”
Students at the four schools -- the two DeVry schools, along with St. George’s University School of Medicine and, since July, Saba University School of Medicine -- are also eligible for tuition benefits from the U.S. Department of Veterans Affairs."
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In a recent post I noted that U.S. medical school enrollment is increasing faster than residency positions. This will squeeze the offshore schools, as the number of graduates of American schools more nearly fills the available residencies.

Payday loans (and other high interest lending) as repugnant transactions

In poor communities there is a profitable business of making very high interest rate loans to employed but "unbanked" workers. High interest rates (between lenders and apparently willing borrowers) have been repugnant transactions for a long time, and payday loans are no exception: here's a story from Pro Publica on the controversy in Missouri. The Payday Playbook: How High Cost Lenders Fight to Stay Legal

Kidney allocation changes expected by end of 2014

Kidney Allocation Changes Approved

Aug 20, 2013 | News, Unos Update

The board approved substantial amendments to OPTN policy for deceased donor kidney allocation. Implementation of the policy is expected to occur at the end of 2014.

Features of the policy include the following:

• prioritization of kidneys with longest estimated function to a limited number of candidates expected to benefit the longest
• wider geographic allocation of kidneys with shorter potential function, to increase utilization for candidates facing a significant mortality risk remaining on dialysis long-term
• definition of waiting time expanded to include time a patient spent on dialysis prior to waiting list registration
• a sliding scale of priority for candidates with high PRA, as well as matching of blood subtype A2 and A2B offers for candidates with blood type B, and
• elimination of the kidney payback system and existing kidney allocation variances.

- See more at: http://transplantpro.org/kidney-allocation-changes-approved/#sthash.lbHqfgWL.dpuf

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Some background on the origins of this policy change are in this Oct 2012 post.