Computer assisted markets: infrastructure

Some time ago the NY Times ran a story on "smart infrastructure:" Bringing Efficiency to the Infrastructure

The story was mostly how better metering and communication can lead to increased efficiencies. Some of these efficiencies come from making new markets possible; e.g. if your electric meter were smarter, it could allow more complicated contracts, in which you could have interruptible service when demand was high (e.g. you could have an electricity contract that would turn off your washing machine when demand was high, but allow you to turn it on again and be billed at a higher rate if you needed it even so.)

The story touches on this when it discusses congestion pricing in Stockholm:
"In 2006, Stockholm experimented with congestion pricing, charging cars up to $4 to enter the downtown area, depending on the time of day. The cars were monitored with RFID cards and webcams that photographed license plate numbers. Drivers had to pay within two weeks or faced penalties, but I.B.M. linked the driver data to 400 convenience stores in the city to make payment easier.
Within a few weeks, the impact in Stockholm was evident, and it has proved permanent. Car traffic in downtown Stockholm has been reduced by 20 percent, carbon dioxide emissions have dropped 12 percent, and the city’s public transport system has added 40,000 daily riders, I.B.M. said. The webcams accurately read license plates, even on snowy days, more than 95 percent of the time. So the RFID tags are no longer in use. After expenses, the smart traffic system generates $80 million a year for the city.
Stockholm is a city in a Scandinavian country with a long environmental tradition, in a socially democratic nation. Yet even in Stockholm, there were complaints initially. The city also took the risk of installing the entire system, calling it a trial, and then having residents vote on it seven months later, after the benefits were apparent. "

Shill bidding in domain name auctions

SnapNames Employee Caught Bidding on Auctions

That's from Elliot's Blog: Domain Name Investing News and Tips. (And you wondered why it was hard to find a domain name...)

HT: Ben Edelman, who notes "Shill bidders sometimes win, and therefore need a plan for how to dispose of the resulting asset. Working at the auction house is helpful."

School assignment in New York City

The December issue of the American Economic Review has our paper on the redesign of the NYC high school assignment system:
Abdulkadiroglu, Atila , Parag A. Pathak, and Alvin E. Roth, "Strategy-proofness versus Efficiency in Matching with Indifferences: Redesigning the NYC High School Match,'' American Economic Review, 99, 5, Dec. 2009, pp1954-1978. And here are the AER links at which you can access the Appendix and Download the Data Set

See my previous posts here and here.

Auction design by Paul Klemperer

Paul Klemperer alerts me to two new market design papers. He writes "here is the paper about the Product-Mix Auction, the new auction design for differentiated goods that I developed for the Bank of England from 2007,
forthcoming in the Journal of the European Economic Association. It is similar to Paul Milgrom's recent work on assignment auctions (we discovered this when we talked last year) -- No exciting theorems, but I paid a lot of attention to how to present simply, so bidders are comfortable participataing (and auctioneers are willing to use). I'm working on how to extend to some degree of complements, so maybe better theorems soon. The Product-Mix Auction: a New Auction Design for Differentiated Goods

"And here is a small enhancement of core-selecting package auctions (with Aytek who is taking up a lectureship (i.e. assistant professorship) at Cambridge University next year) -- we are working on the wider question of whether/when they are a good idea -- we currently take no position on that: A New Payment Rule for Core-Selecting Package Auctions by Aytek Erdil and Paul Klemperer

Course allocation at HBS

Some of the gems of the market design literature involve the careful analysis of existing institutions for allocating scarce goods, to understand the good and bad properties of those mechanisms, and the incentives they give to participants.

The latest example analyzes the way second year MBA courses at the Harvard Business School are assigned.

The Multi-unit Assignment Problem: Theory and Evidence from Course Allocation at Harvard by Eric Budish and Estelle Cantillon

Abstract: "This paper uses data consisting of agents. strategically reported preferences and their underlying true preferences to study strategic behavior in the course allocation mechanism used at Harvard Business School. We show that the mechanism is manipulable in theory, manipulated by students in practice, and that these manipulations cause meaningful welfare losses. However, we also find that ex-ante welfare is higher than under the Random Serial Dictatorship (RSD), which is the only known mechanism that is anonymous, strategyproof and ex-post efficient. We trace the poor ex-ante performance of RSD to a phenomenon, "callousness", specific to multi-unit assignment and unrelated to risk attitudes. We draw lessons for the design of multi-unit assignment mechanisms and for market design more broadly."

A related paper is Budish's proposal for an alternative mechanism: The Combinatorial Assignment Problem: Approximate Competitive Equilibrium from Equal Incomes.
(And here's my earlier post on an early version of that paper.)

Law and market design

Law obviously plays an enormous role in market design.
Haifa University's Forum for Law and Markets is hosting a conference today on Behavioral Analysis of Law: Markets, Institutions, and Contracts

Compensation for donors of human eggs for medical research

Fox News carries the following press release: Pro-Life Feminist Group Sues NYS over Compensation for Women's Eggs .

"Feminists Choosing Life of New York (FCLNY) filed suit Friday in New York State Supreme Court (Albany) to block the use of taxpayer funds to pay women recruited to donate their eggs for embryonic stem cell research."...

"New York State is the first governmental entity anywhere in the U.S. to approve taxpayer money to pay women to undergo an invasive procedure to harvest eggs for embryonic stem cell research.The legal complaint was filed on October 9, 2009 in Feminists Choosing Life of New York v. Empire State Stem Cell Board. In part, the complaint states, "The Payment for Eggs Program provides significant monetary inducements to women to engage in this painful and risky procedure, which in part disproportionately appeals to economically vulnerable women...(it)...fails to satisfactorily provide for informed consent and other safeguards to ensure adequate disclosure to women of the risks of egg harvesting."In 2007, the New York State Legislature enacted a new Title V-A to Article 2 of the Public Health Act, committing $600 million for stem cell research. On June 11, 2009, the Empire State Stem Cell Board (ESSCB), which was given the responsibility for administering the funds, passed a resolution authorizing significant taxpayer monies of up to $10,000 per donation to be used to compensate young women who donate their eggs for research. "...

"The National Institutes of Health guidelines for Embryonic Stem Cell Research recommends against payments to egg donors.The National Academies of Sciences agrees: “No cash or in kind payments should be provided for donating oocytes (eggs) for research purposes." "

HT: Egg Donation & Surrogacy Law Blog via Kim Krawiec at The Faculty Lounge, whose post includes a link to her paper on pricing in the gamete market.

The market for blood plasma

Is Money Tainting the Plasma Supply?

"Hundreds, probably thousands, of Mexicans like Ms. Delgado come to the United States to trade their plasma for dollars. Eagle Pass, a town of 27,000 that bills itself as the place “where yee-hah meets olé,” has two such plasma collection centers. There are about 15 others in border cities from Brownsville, Tex., to Yuma, Ariz.
The centers are run by pharmaceutical companies that transform the plasma into life-saving but expensive medicines for diseases like immune deficiencies and hemophilia.
Some border centers are new while others have been around for many years. They account for only a small percentage of the plasma collected by the industry, with the rest coming from collection centers throughout the United States.
But they have stirred debate in recent years because they illustrate the workings of the $12 billion plasma products business, a fast-growing industry that has depended on the blood of people hard up for cash. Based on typical industry yields and prevailing prices, it appears that a single plasma donation, for which a donor might be paid $30, results in pharmaceutical products worth at least $300.

Away from the border as well, many plasma collection centers have historically been located in areas of extreme poverty, some with high drug abuse. That troubles some people, who say it might contaminate the plasma supply or the health of people who sell their plasma.
“Why in the United States do we have to depend on people who are down and out to donate?” says Dr. Roger Kobayashi, an immunologist in Omaha who uses plasma products to treat many patients. “You are taking advantage of economically disadvantaged individuals, and I don’t think you are that worried about their health.” "
...
"But the plasma companies and federal regulators say the practice is legal, ethical and safe. There have been no known cases of an infectious disease being transmitted through plasma products for more than a decade. And since the body quickly renews its plasma, the process is considered safe for donors if properly monitored.
“It’s not like giving up a kidney,” says Dr. Jay Epstein, director of blood research at the Food and Drug Administration, which regulates the collection centers and the plasma products."
...
"The United States is one of the few countries that allows plasma donors to be paid. (And even here the plasma industry says it pays donors for their time, not for the plasma itself.)
But many of the countries that prohibit compensation do not collect enough plasma. So they rely on plasma or plasma products made from the blood of people who donate in the United States, which supplies more than half the world’s plasma.
“The U.S. is the OPEC of plasma,” says Jim MacPherson, chief executive of America’s Blood Centers, a network of blood banks.
FOR the plasma industry, times have been good. Growth has averaged 8 percent a year over the last two decades. "
...
"To satisfy demand for plasma-based medicines, the industry has increased the number of collection centers to 408, from 299 in 2005, according to the Plasma Protein Therapeutics Association, the industry trade group. Paid donations in the United States rose to 18.8 million in 2008 from 10.4 million in 2005. "

"There are even a few signs that in areas hardest hit by the economic downturn, people who once donated blood without compensation to organizations like the Red Cross are selling plasma instead. “I know of five or six people who are multi-gallon donors who have switched to plasma,” said Doug Klynstra, recruitment manager for Michigan Blood, a nonprofit blood bank. He said the bank’s donations are down 10 percent this year. "

"The blood banks generally collect whole blood, which is separated into red cells, platelets and plasma and often used for transfusions. They almost never pay for donations because that might induce donors to cover up health problems that could make the blood unsafe.
The plasma companies, which collect only plasma, say that is less of a concern for them because their manufacturing process can kill many viruses and because they have more time to screen donors. "

Compensating blood donors

Robert Slonim, Mario Macis, and Nicola Lacetera report on the effect of (non-cash) incentives on whole blood donation: Will There Be Blood? Incentives and Substitution Effects in Pro-social Behavior

Abstract: " We examine how economic incentives affect pro-social behavior through the analysis of a unique dataset with information on more than 14,000 American Red Cross blood drives. Our findings are consistent with blood donors responding to incentives in a “standard” way; offering donors economic incentives significantly increases turnout and blood units collected, and more so the greater the incentive’s monetary value. In addition, there is no disproportionate increase in donors who come to a drive but are ineligible to donate when incentives are offered. Further evidence from a small-scale field experiment corroborates these findings and confirms that donors are motivated by the economic value of the items offered. We also find that a substantial fraction of the increase in donations due to incentives may be explained by donors substituting away from neighboring drives toward drives where rewards are offered, and the likelihood of this substitution is higher the higher the monetary value of the incentive offered and if neighboring drives do not offer incentives. Thus, extrinsic incentives motivate pro-social behavior, but unless substitution effects are also considered, the effect of incentives may be overestimated."

DARPA Red balloons at MIT

The DARPA network challenge has been won by the MIT team: MIT wins $40,000 prize in nationwide balloon-hunt contest

"On MIT's Web site, a link was posted inviting people to sign up to help find the balloons and urging them to invite their friends. It said the MIT Red Balloon Challenge Team "is interested in studying information flow in social networks, so if we win, we're giving all the money away to the people who help us find the balloons!"
It detailed a chain for giving away the money, beginning with $2,000 given to each person who first sent in the coordinates of each balloon.
"We're giving $2,000 per balloon to the first person to send us the correct coordinates, but that's not all -- we're also giving $1,000 to the person who invited them. Then we're giving $500 whoever invited the inviter, and $250 to whoever invited them, and so on..." it said."

Here are some of the details from the MIT site linked to above...
The Challenge
This Saturday, December 5th, DARPA will be deploying 10 large, red weather balloons at 10 fixed locations in the United States. (more info) DARPA is giving $40,000 to the first team of people to find all 10 balloons. Join the MIT team, invite your friends and you can win money, help science, and help charity! (see how it works) .

New York State Senate Votes Down Gay Marriage Bill

Same sex marriage continues to teeter on the cusp of whether Americans regard it as a repugnant transaction, whether it should be legal or illegal. The NY Times story is here.

"The State Senate defeated a bill on Wednesday that would legalize same-sex marriage, after an emotional debate that touched on civil rights, family and history. The vote means that the bill, pushed by Gov. David A. Paterson, is effectively dead for the year and dashes the optimism of gay rights advocates, who have had setbacks recently in several key states.

The bill was defeated by a decisive margin of 38 to 24. The Democrats, who have a bare, one-seat majority, did not have enough votes to pass the bill without some Republican support, but not a single Republican senator voted for the measure. "
...
"Had the legislation passed, New York would have become the sixth state where marriage between same-sex couples is legal or will soon be permitted.
"...Last month Maine became the 31st state to block same-sex marriage through a referendum. The Maine State Legislature had voted to legalize same-sex unions earlier this year, but opponents of gay rights gathered enough signatures to put the measure on the ballot. Last year, California voters repealed same-sex marriage after the State Supreme Court said that gay couples had the right to marry."

Another story follows up the political calculations and miscalculations behind this latest vote: Amid Small Wins, Advocates Lose Marquee Battles
"Just a few months ago, gay marriage looked as if it was on an inexorable path to approval in the liberal redoubt of the Northeast.
Legislatures in Maine, New Hampshire and Vermont had voted to legalize same-sex marriage. Bills to do the same in New York and New Jersey had popular support and champions in the governors’ offices. And advocates of gay marriage were arguing that victories in these states would pressure others to “finish the job.”
But the bill to legalize same-sex marriage in New York failed by a surprisingly wide margin on Wednesday. In New Jersey, Democrats have declined to schedule the bill for a vote, believing that the support is no longer there. Voters in Maine last month repealed a state law allowing same-sex marriage despite advocates’ advantage in money and volunteers.
And on the other reliably liberal coast, California advocates of gay marriage announced this week that they would not try in the next elections to reverse the ban on gay marriage that voters approved in 2008; they did not believe they could succeed.
The losses obscure smaller victories: The District of Columbia Council, for example, voted on Tuesday to allow gay marriage. But in the marquee battles, advocates are losing.
Even supporters of gay marriage say that all the optimism got ahead of the reality."

Here are my previous posts on same sex marriage.

Market for kidnapping

The Hostage Business
"Few sectors have endured the economic downturn of recent years better than kidnapping. Confidence in big banks and stock markets might be shaky, but the crudest form of trade — abducting and bartering people — seems alive and well. Gregory Bangs, the kidnap-and-ransom manager for Chubb Group, an American insurance company, said that patterns of kidnapping around the world are “almost inverse” to that of the global economy. “In a recessionary environment, the kidnapping rate goes up,” he told me. More companies are requesting kidnapping and ransom insurance — Bangs reported a 15 to 20 percent jump at Chubb over the past three years — than ever before. But why? What makes kidnapping and ransom, or K.& R., such a growth industry?
In April, speaking at a security conference in the Nigerian capital Abuja, Mike Okiro, then the inspector general of the national police, shared a revealing fact. He estimated that the total amount of ransoms paid in Nigeria between 2006 and 2008 exceeded $100 million."...

"But as long as families and governments and companies continue to pay ransoms, Okiro told me, “there will be no end to it.”
The U.S. government concurs. Discussing the Somali pirates in April, Secretary of Defense Robert Gates said companies that paid ransoms to the pirates were “part of the problem.” “Clearly, if they didn’t pay the ransoms, we’d be in a stronger position,” Gates added. (When a terrorist organization is involved, paying a ransom can actually put individuals and companies in violation of U.S. laws, including the Patriot Act.) As Erik Rye, an adviser for hostage affairs at the State Department, puts it, “If you’re out there feeding the bears, the bears are going to keep coming into the camp.”
...
"The contemporary kidnapping-and-ransom industry emerged in the late 1970s in response to rampant kidnappings in Colombia and throughout Latin America. Globally, for the next 25 years, most cases occurred in Latin America. But political and economic developments have begun redrawing the map of kidnapping hot spots. Chase still considers Colombia “the most mature market” for kidnapping because Colombian perpetrators have been at it the longest — although incidents decreased after President Alvaro Uribe began to take on the country’s guerrilla movements in 2002. There were 465 reported cases in Colombia last year (down from almost 3,000 in 2002). Mexico now has the most kidnappings, with an estimated 7,000 in 2008, though this number has stayed steady in recent years. In fact, Latin America’s share of total reported kidnappings fell to 42 percent in 2008 from 65 percent in 2004.
Gregory Bangs, the K.& R. manager at Chubb, doesn’t foresee the global market flattening out anytime soon. He said new markets were flourishing outside Latin America. Two emerging markets are in Africa and the Middle East; together their share of reported cases nearly quadrupled between 2004 and 2008. During that time, Somali pirates seized dozens of ships off the Horn of Africa. The ships were usually insured, and the pirates made off with increasingly large sums. In postwar Iraq, criminals relied on kidnapping to raise money, and Al Qaeda used kidnappings and beheadings to spread terror. The Taliban have also turned to kidnapping to raise money. And in Nigeria, what began with MEND quickly expanded. Foreigners are still kidnapped in Nigeria, but because many international companies have pulled their employees out of the country, the majority of cases now involve Nigerian victims. The range of victims seems to keep expanding. Kidnappers have grabbed children on the way to school. This summer, two politicians from central Nigeria were abducted; when their relatives couldn’t pay the ransom, the captors freed the two men to go and find the money — but only after they left their wives as collateral. "
...
"Chase said the proof-of-life question — and the way it is handled — often defines the case. “It’s always comforting when they talk about the P.O.L.,” Chase said. “They’ve done this before. They know the form. They know how the game is played.”

Deferred acceptance in Ghanian school choice

Kehinde Ajayi, a Ph.D. Candidate in the Department of Economics at the University of California, Berkeley, is studying school choice in Ghana. She recently sent me a 2005 document from Ghana's (then) Ministry of Education and Sport "that the government produced when the Computerised School Selection and Placement System (CSSPS) was initially introduced."

It describes a version of a deferred acceptance algorithm (a clearinghouse algorithm that has been discovered a number of times and places, but that game theorists associate with Gale and Shapley 1962), and describes an essential feature, which is that if student A would have displaced student B at school S had he ranked school S first, he will also displace student B at school S even if he ranks school S second (or lower). This is what makes it safe to list schools in your true order of preferences.

"4.2 Displacement
a. Selection on Merit
The computer places all qualified candidates into their first choice schools using the ranking order. The aggregate score of six subjects of each candidate is used to do the ranking.
b. Displacement of 1st choice candidates by 2nd choice candidates as a matter of merit or better performance
The ranking may displace 1st choice candidates with 2nd choice candidates; this will be on merit and not choice. The following table is an illustration:
"Kwasi and Kofi make the following choices of schools and programmes.
...[Table showing that Kwasi, with an aggregate 'score' of 400 ranks Anglican as his second choice, while Kofi, with a score of only 350 ranks Anglican as his first choice...]
"Suppose the cut-off for Science Programme for Opoku Ware is 420 and that for Anglican School is 350, Kwasi is sent to Anglican to compete with first choice candidates for science Programme because his aggregate score is just below the cut-off for Science Programme for Opoku Ware School. Kwasi is then sent to Anglican to compete with the first choice science candidates. Since Kwasi’s aggregate score is higher than that of Kofi’s, Kwasi will then displace Kofi."

School choice in San Francisco, Chicago, and Cambridge MA

Changes in school assignment procedures are being discussed in San Francisco, Chicago, and even Cambridge, MA.

In San Francisco, the redesign is well under way, and the school board has a link to the redesign process: What Have We Done So Far.

An impresssive parent-organized blog outlines the San Francisco Student Assignment system, and the current process intended to reform it, initiated by the San Francisco Unified School District. One of the early posts assembles some of the relevant materials, including the SFUSD page about the Student Assignment Redesign (including some history and legal context), and the
SFUSD technical description of the current Student Assignment Process (which can now be found here).

Chicago has begun to rethink its school choice system; see New Proposed Admission Policy Information


In Cambridge, Parag Pathak proposed that a strategy-proof mechanism replace the old Boston-style mechanism (no longer used in Boston); see School Assigning Process Criticized--MIT professor presents a possible solution to the problem

New York City High School choices are due Dec 4

These days I follow the NYC high schools from a distance, but it's gratifying to see some of the long lasting changes that Atila Abdulkadiroglu and Parag Pathak and I got to help put in place (described here, and for those really interested in technical detail, here).

Here's some advice on ranking schools, from a contemporary observer at InsideSchools.org: HS applications due Dec. 4: How to rank the schools

"Your favorite should come first. You don’t need to play guessing games or set up an elaborate strategy. You have nothing to lose and everything to gain by ranking your top choice number one on your list because schools won’t see how you ranked them.
However if you are applying to a school for which you do not qualify — say you want to apply to a school that accepts only Manhattan residents and you live in Queens — you are wasting a spot on your list if you put it down. Likewise, if a school looks for students with an 85 average or above and your GPA is 70, your chances of getting accepted are slim to none.
What about the schools that tell you, you must put them first, or they won’t consider you? According to the Department of Education, that policy was done away with several years ago. Schools no longer see who lists them first, and they have to come up with their own ranking of students from first to last."

Kidney exchange in People Magazine

In the Nov 30 issue, with Johnny Depp on the cover.

"The chain's home base is the University of Toledo Medical Center, where transplant surgeon Mike Rees performs operations and coordinates the program through his nonprofit, the Alliance for Paired Donation. People enter the chain because they need a kidney and have a friend or family member who is willing to donate, but who isn't a match. Once they enter the chain, Rees's staff inputs their names, blood types and other information into a database of other patient-and-donor pairs; the computer then matches would-be donors and recipients."

The article is referring to a recent reunion of the 20 people involved in Rees' first pioneering non-simultaneous extended altruistic donor (NEAD) chain.

Another organization that has been successfully pursuing NEAD chains among other options is the National Kidney Registry founded by Garet Hil. Here's an article about a recent exchange of theirs: Two couples from Bronx, Jersey exchange kidneys through computer organ donation program.

See here for some more technical material on kidney exchange.

The signaling deadline for the economics job market is midnight tonight

A quarter of new Ph.D.s who failed to signal last year reported that it was because they missed the deadline. The deadline is midnight tonight.

You can register and select your signals here. If you're on the job market, send your signals now.

(You probably don't want to send them to a department ranked higher than the one you are graduating from, and you might want to send them to departments that you don't think will get too many signals. See the Coles et al. paper for the data.)

good luck to all.

The signaling deadline for the econ job market is tomorrow, Tuesday, at midnight

If you are an economist on the jobmarket, planning to be interviewed at the ASSA meetings in January, and if you haven't submitted your two signals yet, now is the time. You can register and select your signals here.

(For everyone else, here is a description of signaling, it's a process by which job candidates can have the American Economic Association send an indication of particular interest to two potential employers out of the many they have sent applications to. The idea is that a limit to two special signals helps employers sort through the many applications they receive when it is time to decide who to interview at the national meetings in January.)

The deadline is tomorrow, Tuesday, at midnight (2400 EST).

The December JOE is out, so there won't be any new job listings before tomorrow.

Now is the time to chat with your advisor, and send your two signals. (It can't hurt and might help, see the paper linked to in yesterday's post.)

The job market for new economists: preliminary report

I chair the AEA ad hoc committee on the job market, and a preliminary version of a report we're writing may be of interest to those on the job market this year (and in particular to those who should be signaling by the end of the day Tuesday). The bottom line for the moment? Don't forget to signal.

The paper is
Peter Coles, John Cawley, Phillip B. Levine, Muriel Niederle, Alvin E. Roth, and John J. Siegfried , " The Job Market for New Economists: A Market Design Perspective," preliminary draft, Nov. 25 2009.
A link to it (which will be updated as the paper proceeds towards completion) is on my market design page here.

Internet resources for the homeless

Being homeless does not necessarily mean being cut off from the internet. The Boston Globe reports Online sites offer a fertile venue for some in need

"On Homelessforums.org, thousands of people post questions and comments about everything from how to stay safe on the streets to where to camp for free. There are pleas for money on CyberBeg.com, which compares itself to a lottery, and Begslist.blogspot.com, which describes itself as a “source for free . . . e-panhandling, online donations, debt help, finding financial resources, and a great place to ask for financial help from the kindness of others.’’