Unraveling and exploding offers in the market for new private equity analysts

The unraveling in this market (which is also highly competitive in salaries) continues. That is, vigorous competition by the timing of (early, exploding) offers coexists with vigorous salary competition.  The NY Times Dealbook has the story.

Private Equity Firms in a Frenzied Race to Hire Young Investment Bankers
By WILLIAM ALDEN and SYDNEY EMBER  FEBRUARY 10, 2015

"Junior investment bankers who graduated from college only last year are being madly courted by private equity firms like Apollo Global Management, the Blackstone Group, Bain Capital and the Carlyle Group in a scramble that kicked off last weekend. 6.After back-to-back interviews, many are now fielding offers for jobs that won’t start until the summer of 2016.

"This process has become an annual rite by private equity firms, which raise money from investors (like pension funds) to buy entire companies. But it has grown more frenzied since the financial crisis, and it started this year weeks earlier than many in the industry had expected. Fearful of missing the best talent being developed at investment banks, the giants of private equity have turned Wall Street’s white-collar entry-level workers into a hot commodity.

“It’s as if these were star athletes,” said Adam Zoia, chief executive of the recruiting firm Glocap Search, who helps private equity firms hire young workers. “The irony is they are professionals six, seven months out of undergrad. It’s hard to imagine you can tell if someone’s a star or not.”
...
"Private equity’s recruiters, trying to secure the best workers for their clients, have helped accelerate the interview timeline, so that it is now the norm to interview workers about 18 months before their jobs will actually start. Some private equity executives say this means the candidates, who have barely encountered their first Wall Street deals, are performing more poorly in interviews.

Participants liken the situation to what is known in game theory as the “prisoner’s dilemma,” in which a lack of information causes private equity firms to act according to their own self-interest rather than find a solution that would be mutually beneficial to all parties. Last year, the process started in late February — weeks earlier than the cycle in 2013.

“There’s essentially always a handful of firms that are the catalysts, and that creates this huge domino effect across the industry,” said Morgan Halberg, a partner at the recruiting firm Dynamics Search Partners. “Every other firm essentially mobilizes and has to be reactive.”

"Many participants traced the beginning of this year’s process to a move by a midsize private equity firm in San Francisco. The firm, Golden Gate Capital, extended a handful of offers to young consulting firm employees on Thursday, according to people briefed on the matter who were not authorized to speak publicly.

"This alone was not enough for the rest of the industry to spring into action. Golden Gate, which has a close relationship with the consulting firm Bain & Company, was not drawing from the investment bank pool where the big private equity firms fish. What’s more, Golden Gate’s internal rationale was that it was responding to moves by other private equity firms to hire consultants. At first, rival private equity firms and their recruiters decided to stand down.

"But on Friday, an email circulated through the industry from a Boston-based private equity firm, Advent International, which said it would begin interviewing candidates from investment banks, people briefed on the matter said. The biggest firms knew they could not afford to wait. Recruiters contacted young bankers Friday night, instructing them to show up for interviews on Saturday and Sunday.

"That led to a weekend of sleepless nights and back-to-back interviews for the would-be hires. In a reflection of how early the cycle began, the Blackstone Group, which had started some interviews on Sunday, was in the middle of recruiting interns for this summer. Golden Gate, now feeling pressure from other firms, told at least one candidate to respond to a job offer by Sunday, shortening the deadline from this Wednesday.

"Many had expected this process to start in early March, or late February at the earliest. But by the beginning of this week, some of the biggest firms had already extended offers for the summer of 2016."

HT: Eric Budish

School Choice Index from Brookings

The Brown Center on Education Policy at Brookings has published
The 2014 Education Choice and Competition Index

Here is their list of school districts that are "leaders in choice"

The report says in part:

"The Recovery School District in New Orleans scores well on nearly all of the components of the ECCI. In particular, there is high availability of choice, with nearly 80% of schools being charters, a supply of affordable private schools, vouchers for private school attendance available from the state, and virtual education provided through Supplemental Course Academy/Course Choice. The school assignment process maximizes the match between parental preference and school assignment through an ideal computer matching algorithm. There is no default school assignment (everyone must choose), a common application for traditional public schools and charters, and information on school performance that includes test results for children attending private schools. Information on school performance is clearly presented with support for parents in understanding and navigating the choice process. Transportation expenses to schools of choice are covered through free public transportation tokens or yellow bus service.

"New York City (NYC) also repeats its position in second place overall and in first place among the 100 largest school districts.2 NYC scores particularly well with respect to its choice process, policies for closing unpopular schools, and information provision to parents and students.

"New Orleans, NYC, Denver, and new to our list of top performers this year, Newark, standout in their use of a centralized computer-based algorithm to assign public high school students to schools in such a way as to maximize the match between student preferences and school assignment, conditional on any admission requirements exercised by the school. Students apply once and receive one offer, assuming they can match with one of the schools they have listed among their choices. New Orleans, Denver, and Newark include charter schools in their single application process, whereas NYC does not."
***********


Although the report doesn't mention The Institute for Innovation in Public School Choice (IIPSC), this is quite a compliment to IIPSC, since, of those top-10 cities, New Orleans, Newark, Washington DC, and Denver are among the cities in which IIPSC has helped design Uniform Enrollment school choice systems. And New York and Boston are the school districts which initiated the market design contribution to school choice, and in which the IIPSC principals got our start, before IIPSC was formed.

"Safety and anonymity" in the design of the Silk Road drug market

Even illegal markets depend for their success on appropriate design. (And law enforcement may depend on disrupting it...) Bloomberg quotes some testimony from the trial of the alleged (and now convicted) “Dread Pirate Roberts” said to have run the black market site.

Silk Road Heroin Dealer Tells ‘Dread Pirate’ Jury of His Success

"(Bloomberg) -- A New York man who faces drug charges that could put him in prison for as long as 40 years told jurors in the trial of the alleged mastermind of the Silk Road online marketplace that the “safety and anonymity” of the website helped turn him from an addict into a successful heroin dealer."

The evidence was apparently overwhelming, and the conviction came quickly, see this account in The Economist: http://www.economist.com/blogs/democracyinamerica/2015/02/silk-road-trial

"TIME is up for the Dread Pirate Roberts. Ross Ulbricht, the 30-year-old Texan physics graduate accused of setting up the first major drugs marketplace on the web, the Silk Road, has been found guilty of all seven drugs-trafficking charges in a Manhattan court room today. And so comes to a close one of the first great criminal cases in this new era of internet-enabled crime."

Mike Rees and reverse transplant tourism in the Toledo Blade

REVERSE-TRANSPLANT TOURISM: Kidney doctor pairs foreign, U.S. recipients
UTMC surgeon says program will save money in long run

Published: Sunday, 2/8/2015 

BY MARLENE HARRIS-TAYLOR
BLADE STAFF WRITER

image: http://www.toledoblade.com/image/2015/02/07/300x_b1_z/08n1rees-8.jpg

Dr. Michael A. Rees helped a man from the Philippines who could not afford a transplant get a new kidney from an American donor.
THE BLADE/JETTA FRASEREnlarge | Buy This Photo

Dr. Michael Rees, a University of Toledo Medical Center kidney transplant surgeon, has spent more than a decade developing ways to increase the number and quality of kidney transplants in the United States through a program he founded, the Alliance for Paired Donation.

Now Dr. Rees, who is also a professor of urology and pathology at the former Medical College of Ohio, is taking his expertise to focus on finding people in developing countries who don’t have the financial means for transplants, while increasing the number of kidneys available for U.S. patients.

Dr. Rees calls his new program reverse-transplant tourism.

A husband and wife from the Philippines, Jose and Kristine Mamaril, are the first participants to benefit from this innovative system that allowed Mr. Mamaril to receive a life-saving transplant in Toledo from an American donor in Georgia. His wife, who has a coveted blood type, reciprocated by donating a kidney to a man in Minnesota who previously would have had to wait years for a match.

According to the website Kidneylink, the average wait for people who need transplants and lack matching donors from their families varies between three and five years.

“In rich countries there’s not enough kidneys for people who have kidney failure, but there is plenty of money to pay for all the transplants. In poor countries, there’s lots of people that need kidney transplants and lots of available donors, but in poor countries they don’t have enough money,” Dr. Rees said.

This new program breaks down some of those barriers and helps bring people with the universal Type O blood into the U.S donor system, while helping someone from another country get access to free medical care.

One year of a kidney patient’s dialysis costs Medicare about $90,000, or nearly triple the $33,000 cost of a kidney transplant, Dr. Rees said. He argues his donor-matching system will ultimately save the federal government and private insurers money because it moves patients with kidney failure, also known as end-stage renal disease, off dialysis sooner.

“It is what health-care reform is all about. It increases access, so now poor people are getting access to transplantation. It reduces the cost of care and it improves the quality of care because a transplant’s a lot better than dialysis. The average person who gets a kidney transplant lives 10 years longer than if the same person had they remained on dialysis,” Dr. Rees said.

‘A miracle’

Mr. Mamaril, 31, had nearly given up hope of ever being able to afford a kidney transplant at home in San Pablo, in the Philippines’ Laguna province. He told his wife they could afford neither the transplant nor dialysis and tried to persuade her to give up on him and save their meager money to take care of their 8-year-old son.

The Mamarils are not poor by Philippine standards. Both college-educated, she is an accountant for Dunkin’ Donuts in Laguna while Mr. Mamaril had been operating a taxi business that transports passengers using motorcycles with trailers.

Everything changed for the family when he began to feel weak and dizzy in October, 2013 — a symptom of his kidneys failing. By the following January he started dialysis, but the couple had to borrow money from relatives to pay for it.

Mr. Mamaril, often speaking through an interpreter, said he worried constantly about how to pay for his expensive medical care. Dialysis or a transplant cost 10 times the family’s income, Dr. Rees said, and the Philippines has no public health system to help pay for transplants.

image: http://www.toledoblade.com/image/2015/02/07/300x_b1_z/08n1kidney-5.jpg

Jose Mamaril received a kidney from a donor in Georgia through the ‘reverse transplant tourism’ program. In return, his wife, Kristine, donated one of her kidneys, which did not match her husband, to a recipient in Minnesota.
THE BLADE/JETTA FRASEREnlarge | Buy This Photo

Mr. Mamaril sold his taxi, and he and his wife sold every piece of furniture in their home. His wife took her bank card to a pawn shop and agreed to have her future wages garnished to get money for his care. But it still wasn’t enough.

“They never gave up on me,” he said.

During one of his hospital visits Mr. Mamaril, who is Catholic, called out to God: “I’m going to go with you now.”

The only thing that kept him going was the thought that “my son needs me,” he said.

Then fate intervened.

Mr. Mamaril calls it a miracle. The doctor who had been treating him at the hospital in Manila, Dr. Siegfried Paloyo, had worked for a short time in the United States, where he met and befriended an associates of Dr. Rees. The mutual friend brought together the two kidney surgeons who were thousands of miles apart in different countries.

Finding right fit

Dr. Rees had developed the idea for his reverse-tourism transplant program, but he needed to find a developing country that had a medical structure in place to support ongoing care for kidney patients.

“The transplant infrastructure in the Philippines was well-developed and Don was an excellent doctor,” Dr. Rees said.

Dr. Rees asked Dr. Paloyo to find a couple who were struggling financially and whose kidney donor would have Type O blood, the universal-donor type that can be received by nearly anyone. He also preferred a kidney patient with Type A blood, because that person would match about 85 percent of the U.S. population.

Jose and Kristine Mamaril fit the description perfectly.

Dr. Rees raised $150,000 from private Toledo donors and invited the couple to come to UTMC to be his program’s first participants, but getting all the pieces in place for the exchange took several tries. After five different attempts to match Mr. Mamaril with an American donor, the couple finally arrived in Toledo on Dec. 3.

Mrs. Mamaril said there were several times during this harrowing ordeal that she thought, “This will never happen.”

Mr. Mamaril said his faith helped him get through the months of medical procedures, having his hopes dashed when donors didn’t match, and watching his family fall into abject poverty.

At 7:30 a.m. on Jan. 6, the three-way kidney exchange began. Mrs. Mamaril’s donor kidney was removed and sent to Minnesota. The kidney intended for Mr. Mamaril was removed from the man in Georgia and flown to Toledo.

By 4 p.m., Mr. Mamaril was in surgery receiving his new kidney. Sitting in a UTMC conference room two weeks later, he said he felt great.

“I’m so happy I get my new kidney. I still believe in God,“ he said.

Mr. Mamaril also had an opportunity to talk with his kidney donor via a video conference call between Toledo and Georgia.

“He said, ‘Thank you and I love you,’ ” Mrs. Mamaril said speaking for her husband.

Dr. Rees said he now has an even larger task ahead in trying to create a system where his reverse-transplant tourism program is sustainable.

He is working to convince private insurance companies this program will help more Americans get kidneys and save them money in the long term.

“The critical piece in all of this is I don’t yet have a commercial insurance industry who has agreed to give me $150,000 to do the next one. I have six commercial insurance companies who are interested, but this remains a simple act of charity until it becomes sustainable because the insurance industry recognized the value of the concept,” Dr. Rees said

Read more at http://www.toledoblade.com/Medical/2015/02/08/Kidney-doctor-pairs-foreign-U-S-recipients.html#sZwHDp26aqLsVF4F.99

An economist's perspective on transplantation--in Transplantation (the journal)

I have a paper in the latest issue of the journal Transplantation, discussing some approaches to current challenges facing transplantation.

I discuss ways to extend kidney exchange by initiating nondirected donor chains with some deceased donor organs, and by developing  international kidney exchange (along the lines of what Mike Rees calls  reverse transplant tourism). Reducing barriers to participation by transplant centers would also help (e.g removing financial barriers with some kind of standard acquisition fee) and removing barriers for enrolling easy to match pairs, including compatible pairs.  I also discuss ways to increase deceased donor registration, including priorities for donors, and providing other kinds of incentive for donation.

Roth, Alvin E., “Transplantation: One Economist’s Perspective,” Transplantation, February 2015, 99, 2, 261–264

(this link will only get you to the first page; )

Here are some relevant passages from the rest of the paper:

"Extending the reach of kidney exchange

"One way to make kidney exchange accessible to more patients would be to simplify participation. Developing a standard acquisition charge for living donor kidneys  would remove some barriers that arise e.g. from different costs of nephrectomies at hospitals that may need to ship each other kidneys. And matching algorithms could be adjusted to guarantee hospitals that they and their patients won’t lose transplants or sacrifice patient care if they enroll all pairs in exchange (and not just hard-to-match pairs).17 Enrolling easy-to-match pairs, including compatible pairs, can be organized to help those pairs find better matches, and also makes it much easier to find matches for hard-to-match pairs.9, ,  Incentives for transplant centers to enroll their non-directed donors are already being implemented (a chain typically is terminated with a patient on the waiting list of a center that enrolled a non-directed donor).

"Another way to accomplish more transplants through exchange would be to allow some non-directed donor chains to be initiated with deceased donor kidneys1 which, properly organized, could facilitate more transplants and shorten the wait for deceased donor kidneys for all patients.

"Kidney exchange in the developed world could also be extended to patient-donor pairs from countries in which treatment for ESRD is essentially unavailable for large parts of the population.  Such patient-donor pairs could, for example, be invited to come to the U.S. to participate in kidney exchange , financed by the American taxpayer from the savings that result from removing an American from dialysis through receiving a transplant, which are more than sufficient to finance the additional surgeries.  (The bureaucratic obstacles to such exchanges and financial arrangements will be formidable, but the potential to aid both domestic and foreign patients is substantial.)

How else to increase donation?

"There remain many avenues other than kidney exchange through which the shortage of transplantable organs might be reduced.

"In the U.S., the scope for recovering many more transplantable organs from deceased donors seems somewhat limited for most organs, given current technology and recovery rates. But there is suggestive evidence that more frequent opportunities to register as a deceased donor would increase registration, and that the manner in which registration is solicited can influence rates of family consent for donation.

"There is growing consensus that donors should not face financial disincentives from donating, ,  and recent evidence that the costs borne by living donors are substantial enough to reduce donation in recessions. ,  There is consequently great interest in exploring ways to remove disincentives or provide inducements for donation.

"Several novel features of recent Israeli legislation are worth study.  Deceased donation is encouraged by giving registered donors and next-of-kin of deceased donors some priority to receive deceased donor organs. Living kidney donors are also reimbursed 40 days wages, at their own wage rate, to offset the costs of donation. Initial indications are that the new Israeli law is increasing donation.

"The most contentious part of the discussion of how to increase donation concerns cash compensation to donors, particularly living kidney donors. With the prominent exception of Iran, which specifically permits cash payments for kidneys , there does not appear to be a legal market for the purchase and sale of organs for transplant anywhere else, although illegal black markets are widely reported, and occasionally prosecuted.

"However the critical shortage of transplantable organs around the world prompts continual discussion of whether to relax the ban on cash compensation. For example, the March 2014 issue of the Journal of Medical Ethics devoted five articles to the subject, all by philosophers. While this discussion is too important to be left only to philosophers, neither can it be confined to the ongoing debate among transplant professionals, given the public resources devoted to transplantation and the important implications transplantation has for health policy.

"The arguments, pro and con, will already be largely familiar to those who follow this debate.  I will simply try to add some context to the discussion by noting that the ban on organ sales is not unique: other kinds of markets have also been banned in the past, and presently, and laws have changed over time.

"Of course, banning markets does not always end them: black markets for narcotics make clear that outlawing markets is simpler than abolishing them. In the United States, the manufacture and sale of alcoholic beverages was illegal from 1920 to 1933, during which time black markets for alcohol thrived. Less familiarly, an 1824 editorial in The Lancet comments on the black market in which medical schools bought cadavers for dissection from grave robbers, known as “resurrection men,” because the only cadavers that could legally be dissected were from executed murderers.  (The Anatomy Act of 1832 expanded the sources of legal cadavers for dissection in Britain.)

"Let’s call a transaction repugnant if some people want to engage in it, and others, who aren’t materially affected, don’t think they should be allowed to .

"By this definition, sales of kidneys are widely repugnant, as are (or were) the sale of narcotics, alcohol, and cadavers. But note that the ban on kidney sales is different from these other bans, since there is, or was, general disapproval of narcotics, alcohol, and dissection. But there is no similar disapproval of kidney donation and transplantation; it is only sales that are repugnant.

"This turns out not to be too unusual: a transaction that is not otherwise repugnant sometimes becomes so when money is added to the mix. For example, charging interest on loans was largely banned in medieval Europe, although loans were permitted. (The relaxation of that ban has had profound effects on the modern economy.)  Note that repugnance doesn’t only change in one direction—some transactions that used not to be repugnant are widely banned today. Indentured servitude, for example, is no longer legal in the U.S., although it was once a common way of purchasing passage across the Atlantic.41

"Some transactions are banned in some places and not others, e.g. those concerning sale of blood and blood products, and reproductive goods and services such as sperm, eggs, and surrogacy. Legal markets in some places and not others give rise to “fertility tourism,” and many countries that ban payment for blood plasma import plasma products from the U.S., where such payments are legal.

"The repugnance to kidney sales involves concerns about the identity and welfare of potential sellers. The same concerns cause many proposals for allowing some forms of compensation to address the need to avoid exploiting the poor and vulnerable, as existing black markets for kidneys are widely seen to do.  The debate on how to proceed seems likely to focus on removing disincentives to donate and providing incentives that are not seen as leading to coercive or exploitative situations. The debate can be furthered by identifying specific sources of repugnance, and considering how inducements could be structured to avoid them. , ,

"In the meantime, kidney exchange has proved to be a way of bringing some of the benefits of exchange to transplantation without running into the barrier of repugnance. So it seems promising to consider ways of extending its reach, as discussed above."

Conference on Auctions, Market Mechanisms and Their Applications (AMMA 2015)

Scott Kominers writes:

"Lirong Xia and I are co-organizing a new iteration of the Conference on Auctions, Market Mechanisms and Their Applications (AMMA 2015).

Any chance you could share this call for papers with your students, and maybe blogvertize it?"

The Third Conference on Auctions, Market Mechanisms and Their Applications

August 8–9, 2015

Chicago, Illinois, United States

HOME

COMMITTEES

• Organizing Committee
• Program Committee

CALL FOR PAPERS

AUTHOR INSTRUCTIONS

• Initial Submission

PRACTICAL INFORMATION

• Venues

CONTACT US

The Third Conference on Auctions, Market Mechanisms and Their Applications (AMMA 2015) 

 

• AMMA 2015 will be held August 8-9, 2015 at the University of Chicago's Becker Friedman Institute and Booth School of Business.

AMMA focuses on the economic, algorithmic, technical, and practical issues that arise in developing and deploying market mechanisms. This includes, but is not limited to, theoretical and empirical examination of questions like:

• Is a market the right mechanism for the problem? What are the externalities involved? What are the issues with central planning?
• How should novel markets be organized? What is the "right" micro-structure for a given setting?
• What is the best way to provide incentives? Is (real) money necessary?
• How do markets function in artificial economies (cf. bank runs in Second Life and similar games)?
• What protocols maximize the social value of market intermediaries?
• Is there a need for new mechanisms for specific applications?

In addition to more traditional academic papers, we are especially interested in papers presenting experiences from the real world (case studies and new applications). Below are some potential areas, but the list is illustrative rather than exhaustive -- we welcome papers in all areas of market design. Sample areas include:

• Content delivery networks
• Resource allocation in networks and distributed computing
• Online auctions and exchanges
• Markets and incentives in crowdsourcing
• Entrepreneurial market design
• Prediction markets
• Airport landing slot allocation
• Road congestion pricing
• School choice matching
• Organ exchange
• Social networks

• Financial market design
• Combinatorial auctions and exchanges

Papers can be submitted via EasyChair, at https://easychair.org/conferences/?conf=amma2015.

Uber, surge pricing, and the Red Cross

Uber, faced with criticism that it raised prices in Sydney during an emergency, but wanting to keep drivers incentivized to be available when needed, has announced that in such cases it will charge high prices but donate its share to the Red Cross: PARTNERSHIP WITH AMERICAN RED CROSS TO SUPPORT CITIES AND CITIZENS DURING DISASTERS

"Uber is proud to announce a national partnership with the American Red Cross to help cities and citizens during disasters. The partnership took effect last week as this season’s first tropical storm, Arthur, developed.

Uber is partnering with the American Red Cross1 to help communities’ disaster relief efforts.

• During disasters and relevant states of emergency, Uber is committing to donate its commissions on surge trips to the American Red Cross.
• That means that for trips with elevated pricing, 20% of the total fare will be donated to the American Red Cross’ disaster relief efforts.
• Uber will also support ongoing community events like blood drives and donation drives with safe, affordable and reliable transportation options for American Red Cross’ volunteers and participating community members."

************

 HT Carmen Wang

Differential Privacy: an appreciation of Cynthia Dwork

On Thursday I heard Cynthia Dwork talk about differential privacy in San Diego, and here is an appreciation of her at the CS blog called Godel's lost letter and P=NP by Dick Lipton and Ken  Regan:

Cynthia Dwork and a Brilliant Idea

Here's their introductory paragraph:
"This concept is brilliant. It is, in our opinions, one of the greatest definitions of this century. Okay the century is just fifteen years old, but it is a terrific notion. She deserves credit for seeing that this simple one would have such far reaching consequences and for following through on it. Her paper—still in the 12-page ICALP 2006 proceedings format—begins with three prose pages of motivation that are a breath of fresh air. The definition originated from work with Frank McSherry in a prior paper also with Kobbi Nissim and Adam Smith, and has grown to fill a book joint with Aaron Roth."

Some history of kidney exchange

Here's a retrospective paper on kidney exchange and how technology has changed to keep up with the changing environment, just out in Interfaces. (You can also find a video of the presentation by scrolling down here.)

Kidney Exchange and the Alliance for Paired Donation: Operations Research Changes the Way Kidneys Are Transplanted

Ross Anderson
Massachusetts Institute of Technology, Cambridge, Massachusetts 02142
rma350@gmail.com,

Itai Ashlagi
Massachusetts Institute of Technology, Cambridge, Massachusetts 02142
iashlagi@mit.edu,

David Gamarnik
Massachusetts Institute of Technology, Cambridge, Massachusetts 02142
gamarnik@mit.edu,

Michael Rees
The Alliance for Paired Donation, Maumee, Ohio 43537
michael.rees2@utoledo.edu,

Alvin E. Roth
Stanford University, Stanford, California 94305
alroth@stanford.edu,

Tayfun Sönmez
Boston College, Chestnut Hill, Massachusetts 02467
sonmezt@bc.edu,

M. Utku Ünver
Boston College, Chestnut Hill, Massachusetts 02467
unver@bc.edu

Permalink: http://dx.doi.org/10.1287/inte.2014.0766

Published Online: February 3, 2015

Page Range: 26 - 42

• Abstract
• Full Text
• References
• Supplemental
• PDF

Abstract

Many end-stage renal disease sufferers who require a kidney transplant to prolong their lives have a relative or friend who has volunteered to donate a kidney to them, but whose kidney is incompatible with the intended recipient. This incompatibility can sometimes be overcome by exchanging a kidney with another incompatible patient-donor pair. Such kidney exchanges have emerged as a standard mode of kidney transplantation in the United States. The Alliance for Paired Donation (APD) developed and implemented nonsimultaneous extended altruistic donor (NEAD) chains, an innovative technique that allows a previously binding constraint (of simultaneity) to be relaxed; thus, it permits longer chains and better-optimized matching of potential donors to patients, greatly increasing the number of possible transplants. Since 2006, the APD has saved more than 220 lives through its kidney exchange program, with more than 75 percent of these achieved through nonsimultaneous chains. Other kidney exchange programs have adopted the technology and methods pioneered by APD, resulting in more than 1,000 lives already saved, with the promise of increasing impact in coming years. In 2013, the percentage of transplants from nonsimultaneous chains reached more than six percent of the number of transplants from living donors. In this paper, we describe the long-term optimization and market design research that supports this innovation. We also describe how a team of physicians and operations researchers worked to overcome the skepticism and resistance of the medical community to the NEAD innovation.

Large matching markets as limits

One popular way to study large markets is to look at limits as market size goes to infinity. This is often the only tool we have to develop theory for large markets (computer simulations are another story, and a useful complementary tool).

One difficulty of using limit theorems or other models of infinitely large markets to study the actual, finite markets that we are interested in is that, depending on how the limit is taken, the limit market may have properties that are not shared by the finite markets that concern us. So, a lot of care has to be taken in formulating how the market goes to a limit, and in interpreting the theorems that result (or perhaps I should say in discerning which of theorems about the limit market are informative about the finite markets).

A nice example of taking a limit in a thoughtful way is in a recent paper by Konrad Menzel of NYU, called LARGE MATCHING MARKETS AS TWO-SIDED DEMAND SYSTEM. (I don't understand the estimation issues well enough to comment on them, but I liked the way the large market was modeled as a limit.)

He looks at matching markets in which each agent gets a utility payoff based on the observable properties of the person they are matched with, plus a random component drawn from a distribution with full support. So the danger in such a model is that in the limit the random draws will all allow everyone to get a great match (with someone for whom they have a very large random match quality), and no one will be unmatched. But the finite markets in which he's interested don't have that property: some people are unmatched. So, in taking the limit, the outside options that each agent enjoys have to increase proportionally with their growing opportunities to match to someone with whom, randomly, they are a mutually great match...

Here's how he describes that part of his model.

"The rationale for modeling the outside option as the maximum of J independent draws for the idiosyncratic taste shifters is that as the market grows, the typical agent can choose from an increasing number of potential spouses. Since in our setup the shocks ηij and ζji generally have unbounded support, any alternative with a fixed utility level will eventually be dominated by one of the largest draws for the increasing set of potential matching partners. Hence, by allowing the agent to sample an increasing number of independent draws for the outside option, it can be kept sufficiently attractive to ensure that the share of unmatched
agents remains stable along the sequence."

This reminds me of issues that Itai Ashlagi and I  (with Mike Rees and David Gamarnik in various papers) have run into when using limit theorems to understand kidney exchange, while keeping the compatibility graphs as sparse as those in the finite clinical exchanges we wish to study.

This post profits from a discussion with Jacob Leshno, when he and I recently were involved in a very finite, very practical matching event in Southern California.  The dress code was semi-formal:

Information theory and applications

I'll be speaking today in San Diego at a conference on Information theory and applications

 Here's the program.

I'll give a lunchtime talk on "Market Design," in which I'll introduce some of the big themes of market design, with the focus on creating marketplaces in which a lot of private information that is distributed among many participants can be aggregated to help arrive at efficient outcomes.

That will be followed by a session on Matching Based Market Design, organized by Vijay Vazirani,:

Chair: Aranyak Mehta, Google Research
2:15 “Recent developments in kidney exchange,” Alvin Roth
2:35 “Online Matching and Ad Allocation,” Aranyak Mehta
 2:55 “Simple Auctions with Simple Strategies,” Nikhil Devanur*, Jamie Morgenstern, Vasilis Syrgkanis, Matt Weinberg
3:15 “School choice,” Atila Abdulkadiroglu

Mike Rees launches "Reverse transplant tourism" at the Alliance for Paired Donation

Philippine couple receives first operation in Reverse Transplant Tourism

NBC videos: https://www.youtube.com/watch?v=f1ZA3uQslFc 

"TOLEDO -- A couple from the Philippines is preparing to return to their country after undergoing life-saving transplant surgery here in Toledo.

They have been through an amazing journey so far. But the biggest accomplishment from their ordeal may be yet to come, and may benefit thousands of people around the world.

Jose is undergoing one of his last dialysis treatments before his kidney transplant. He is the first organ recipient in a pioneering program developed by University of Toledo Medical Center surgeon Dr. Mike Rees.

Being the first person to benefit from Revese Transplant Tourism, Jose is almost the ultimate lottery winner. "This has never happened before," said Dr. Rees. "And through a series of chance encounters, he’ll be the first to benefit from this."

Those encounters all began in the city of San Pablo, in the Philippines. In October, 2013, Jose’s kidneys began to fail. Dialysis or transplantation would cost ten times Jose’s income as a debt collector combined with that of his wife, Kristine, an accountant.

Jose was ready to stop treatments and resign himself to death. But his son, eight-year-old John, insisted he hold on.

“He asked, if you go through this surgery maybe we will be father and son again," Jose told NBC 24. "And you had to keep on going.”

In their hometown of San Pablo in the Philippines, Jose and Kristine sold their possessions. They sold their house. They even pawned their ATM card to pay for his treatments. And then, when they had used up all their resources, something like a miracle happened.”

Dr. Don Paloyo, Jose’s doctor in Manila, had been introduced to Dr. Rees through a mutual friend. Jose and Kristine had just the right pairing of blood types, and just the economic circumstance, to benefit from Dr. Rees’s program. “I said, you know, I think that’s the way for one of my patients to go," said Dr. Paloyo.

It took months to raise the needed 150-thousand dollars to pay for Jose and Kristine’s trip to America and arrange a series of organ donations.

Ultimately, Jose would receive a kidney from a donor in Georgia, Kristine would donate her kidney to a recipient in Minnesota. The Minnesota recipient had a willing kidney donor, been offered a kidney by an acquaintance, but they had at was an incompatible tissue match. So, instead that donated kidney will go to a recipient in Seattle.

The unique twist in Dr. Rees’ program is what makes it affordable. He is working to convince American insurance companies to pay for a transplant and follow-up care because the insurance companies will actually save money.

"You can pay for three kidney transplants for the cost of one patient to get dialysis," said Dr. Rees.

And recruiting a foreign donor makes sense because the cost of follow up care is less in countries like the Philippines.

"So the amount of money that we would have to put up to pay for an American to get a transplant would be significantly more than we would have to pay for a recipient in the Philippines," said Dr. Rees.

Dr. Rees calls his program Reverse Transplant Tourism. And in addition to saving private insurers enough to pay for itself, it could reduce the cost of treatment through Medicare by billions. "We’ve actually achieved a holy grail of health care reform," said Dr. Rees.

"It’s revolutionary," said Dr. Paloya. "It’s a game changer I think."

And for the poorest of poor patients around the world, it could also be a life-saver.

Dr. Rees’s Reverse Transplant Tourism program could require changes in current transplant laws, especially when it comes to making it eligible for Medicare or Medicaid insurance. But Rees and his foundation, the Alliance for Paired Donation, are working to lay the groundwork for that."

Joel Klein and New York Schools, at the World Bank

Joel Klein, the former Chancellor of the New York City School system, recently spoke at the World Bank about his new book "Lessons of Hope: How To Fix Our Schools.". Here's an account of the talk/discussion of the book by Harry Patrinos, who was his discussant at the World Bank event. (Klein was the Chancellor in whose administration  Parag Pathak and Atila Abdulkadiroglu and I helped design a new school choice process for NYC high schools, which is briefly mentioned in the book and in the article.)

A System of Great Schools: Joel Klein’s Legacy in New York City  

Organ donation in Turkey

The religious debate about organ donation in Turkey may have reached a turning point. Here's a story from the Daily Sabah:

Imams to lead organ donation efforts in Turkey

"Yesterday, Turkey's Presidency of Religious Affairs (DİB) launched a new campaign for imams to raise awareness about organ donation, while DİB head Mehmet Görmez urged imams to donate their organs first before advising the congregation to do so.

"DİB, the top religious authority in the country, quashed a religious debate on whether donating organs is permissible in Islam by introducing a new campaign to raise public awareness about organ donation.

"Görmez and Minister of Health Mehmet Müezzinoğlu attended a meeting in order to inform religious figures on the matter in the Turkish capital Ankara.

"Görmez called upon imams, muftis and other members of the religious authority "to practice what they preached" and donate their own organs. "Sometimes, clerics fail to act in line with advice they dispense to their congregation. On this issue, we should lead the people. I call on my colleagues to tell their congregation in the sermons that they have donated their organs," Görmez said. "This will make people attending mosques heed your advice," he added.

"It is the greatest alms one can deliver from the heart," he said. Görmez said he found it odd that organ donation has been the subject of contention for decades among clerics. "Life, value of a human being's life are at the center of all religions," Görmez said. He quoted a verse from the Quran that says that killing someone is equal to killing humanity and giving life to another is equal to giving life to humanity."

World Congress of the Econometric Society : 17th to 21st August 2015 in Montreal

11th World Congress of the Econometric Society : 17th to 21st August 2015
Montréal, Canada

There's lots of market design among the featured lectures so far:

Econometric Society: 
https://www.econometricsociety.org/
Paper submission (Deadline for submissions: February 15, 2015):
https://editorialexpress.com/

Scientific Program Committee

• Bo Honoré (Princeton University)
• Ariel Pakes (Harvard University)
• Monika Piazzesi (Stanford University)
• Larry Samuelson (Yale University)

Local Organizing Committee:

• Jean-Marie Dufour, Chair (McGill University)
• Marine Carrasco (Université de Montréal)
• Rui Castro (Université de Montréal)
• Russell Davidson (McGill University)
• Georges Dionne (HEC Montréal)
• Prosper Dovonon (Concordia University)
• Alain Guay (Université du Québec Montréal)
• Lynda Khalaf (Carleton University and CIREQ)
• Ngo van Long (McGill University)
• Marc Henry (Pensylvania State University and Université de Montréal)

Named Lectures:

• Predidential : Robert Porter (Nothwestern University)
      "Empirical Analysis in Auction Design" (Chair: Robert Wilson)
• Cowles Lecture: Elie Tamer (Nothwestern University)
      "Sensitivity Analysis in Econometric Models"
      (Chair: Donald W. K. Andrews)
• Frisch Lecture: Alvin E. Roth (Stanford University)
      "Kidney Exchange: New Developments and Frontiers" (Chair: Robert Wilson)
• Walras/Bowley Lecture - Per Krusell (Stockhom University):
      "Climate Change Around the World"
• Fisher-Schultz Lecture: Darrell Duffie (Stanford University)
      "The Design and Efficiency of Over-the-Counter Financial Markets" (Chair: John Geanakoplos)

Invited Talks:

• 1. Industrial Organization
Matthew Gentzkow (University of Chicago):
“Competition and Persuasion”
Michael D. Whinston (Massachusetts Institute of Technology):
“Recent Advances in the Empirics of Vertical Contracting”

Discussant: John Asker (University of California, Los Angeles)


• 2. Macroeonometrics
Ulrich Mueller (Princeton University)
"Ultra Low-Frequency Econometrics"
Harald Uhlig (University of Chicago):
“Shocks and Sharpe Ratios: Recent Advances in Empirical Macroeconomics”

Discussant: Frank Schorfheide (University of Pennsylvania)


• 3. Agency problems
Johannes Horner (Yale University):
“Learning and Experimentation”
Igal Hendel (Northwestern University):
“Dynamic Contracting in Insurance”

Discussant: Bernard Salanié (Columbia University)


• 4. Big Data
Serena Ng (Columbia University)
"Opportunities and Challenges: lessons from analyzing terabytes of data"
Jesse Shapiro (University of Chicago)
"Social Science with Big Data"

Discussant: Christian Hansen (Chicago Booth)


• 5. Matching
Fuhito Kohjima (Stanford University):
“Recent Developments in Matching Theory and their Practical Applications”
Parag Pathak (Massachusetts Institute of Technology):
“Designing School Assignment Mechanisms”

Discussant: Federico Echenique (California Institute of Technology)


• 6. Partially Identified Models
Azeem Shaikh (University of Chicago)
"Practical and theoretical advances in inference for partially identified models"
Kate Ho (Columbia University)
"Partial Identification in Applied Research: Benefits and Challenges"

Discussant: Jack Porter (University of Wisconsin-Madison)