Microeconomics and Market Design at Yahoo!

Microeconomics and Market Design  By Michael Schwarz and David Reiley

• What are the effects of complexity in mechanism design? Participating in an auction mechanism (or any market institution) requires time and effort on the side of the buyers. That in turn may lead some buyers to bid very conservatively, or not to participate at all, in order to economize on effort. We lack a theory for quantifying the complexity of a mechanism.
  
• Auction theory and matching theory offer models and algorithms for allocating goods or matching market participants. However, the majority of markets do not use structured mechanisms (such as auctions and matching algorithms). Why are some markets (such the medical residency match) using centralized matching procedure while other markets (such as the purchases of automobiles with various options packages) do not? Answering this question may help to design structured market mechanisms for the markets where chaotic negotiations rule the day.
  
• Understanding when and how reputations emerge, and how to improve the designs of structured reputation systems. Reputations of individuals and businesses play an important role in economic and personal life. With some exceptions, most notably in electronic commerce, the mechanisms for accumulating reputation are informal rather than structured.
  
• How should a firm set posted prices for a menu of products? Although economics offers a theoretical framework for how to set prices, most theory assumes omniscience about demand. To build a practical pricing engine, one needs a system that generates exogenous price variation and then uses it to calculate appropriate prices going forward. Yahoo! offers thousands, even millions, of different advertising products, so estimating a demand system suffers from the curse of dimensionality as well as practical constraints (perceived fairness, etc.) in generating price variation. We are looking for better theory and econometrics for the problem of building a pricing engine.

This is part of Yahoo!'s Key Scientific Challenges Program, about which they say

"We invite PhD students working in each of our core research areas to review the challenges listed below and submit an application between January 24th - March 11th, 2011 to be considered for the Key Scientific Challenges Program."

Program Award Benefits

• $5,000 unrestricted research seed funding which can be used for conference fees and travel, lab materials, professional society membership dues, etc.
• Exclusive access to select Yahoo! datasets
• The unique opportunity to collaborate with our industry-leading scientists
• An invitation to this summer's exclusive Key Scientific Challenges Graduate Student Summit where you'll join the top minds in academia and industry to present your work, discuss research trends and jointly develop revolutionary approaches to fundamental problems

HT: Noam Nisan at AGT

NPR On Point discusses kidney allocation proposals

The On Point show at National Public Radio has a broadcast on the pros and cons of the recent proposal to change the allocation of deceased donor kidneys, to take more account of age.

Allocating Organs: Who Gets the Next Kidney?

Guests:

Rob Stein, health reporter for the Washington Post. Read his article “Under kidney transplant proposal, younger patients would get the best organs.”
Kenneth Andreoni, professor of surgery at Ohio State University and chair of the Kidney Transplantation Committee, which is reviewing kidney organ procurement, distribution, and allocation for the United Network of Organ Sharing.
** See the full “concept document” and submit your comments.
Lainie Friedman Ross, professor and associate director of the MacLean Center for Clinical Medical Ethics at the University of Chicago.
Arthur Caplan, professor and director of the Center for Bioethics at the University of Pennsylvania.

Lainie Ross worries about the effect of this change on the incentives for live donation (starting just before minute 10). 

The special (Medicare) status of kidney disease

Special Treatment — The Story of Medicare’s ESRD Entitlement
NEJM, February 16, 2011, by Richard A. Rettig, Ph.D.

"In October 1972, Medicare, which had been enacted for the elderly in 1965, was extended to the disabled by the Social Security Amendments. One provision, added at the last minute, declared that persons with chronic renal disease who required hemodialysis or kidney transplantation “shall be deemed to be disabled” for purposes of Medicare Parts A and B. To be eligible for this Medicare coverage, patients had to have paid into the system long enough to be “fully or currently insured” under Social Security or be the spouse or dependent child of someone who was. This near-universal Medicare entitlement for end-stage renal disease (ESRD) has now been in effect for nearly 40 years.
...
In 2008, there were more than 112,000 new patients with ESRD in all eligibility categories (elderly, disabled, and ESRD-only). There were approximately 548,000 U.S. patients undergoing dialysis at the end of 2008, but many of them were not covered by Medicare, either because they had not yet fulfilled the initial waiting period or because they had received transplants and their coverage had ceased after 3 years. Medicare expenditures for ESRD in 2008 were $26.8 billion for Parts A and B. Non-Medicare expenditures for ESRD (covered by employer-sponsored group health plans or paid directly by patients) added another $12.7 billion, for total national expenditures of $39.5 billion.¹ According to an analysis by the U.S. Renal Data System, ESRD beneficiaries represented 1.3% of all Medicare beneficiaries and used 7.9% of Medicare expenditures.
...
"So how was it that full coverage for treatment of one specific disease became enshrined in U.S. law? The story began during World War II, in Nazi-occupied Holland, where Willem Kolff invented the artificial kidney; after a visit by Kolff to the United States in 1947, a modified version of his machine was developed and used in Boston by John Merrill and colleagues at the Peter Bent Brigham Hospital. During the Korean War in the early 1950s, proof of concept was provided for treating acute renal failure with this Kolff–Brigham device. In 1960, Belding Scribner and Wayne Quinton, at the University of Washington Hospital in Seattle, invented an implanted arteriovenous shunt that made it possible for a patient to be connected to the machine repeatedly and ushered in the use of hemodialysis as a treatment for chronic renal failure. The shunt was later replaced by a subcutaneous fistula developed by the physicians Michael Brescia and James Cimino at the Bronx Veterans Administration (VA) Hospital.
...
" In Seattle, in response to financial limitations, access to dialysis was restricted through explicit rationing carried out by an anonymous lay committee — an approach that was laid bare for the American public in a Life magazine article in November 1962.² Elsewhere, decisions limiting access to dialysis were tacitly incorporated into traditional medical decision making. Dialysis highlighted the tragic choices that had to be made when fundamental societal values encountered problems of scarcity.
...
"In November 1971, a patient received dialysis — albeit very briefly — at a hearing of the House Committee on Ways and Means. Many casual observers attribute the passage of the 1972 legislation to this event, overlooking the myriad other contributing developments. But the committee saw that the patient was a family man, in his prime working years, who could be rehabilitated and returned to gainful employment — with help from his government. Ultimately, the ESRD entitlement was added to Medicare because the moral cost of failing to provide lifesaving care was deemed to be greater than the financial cost of doing so."

New proposals for allocating deceased-donor kidneys

UNOS has put out a proposal for public comment: Concepts for Revising Kidney Allocation 

Here is a pretty good Washington Post story about it (with a slightly overstated headline): Under kidney transplant proposal, younger patients would get the best organs

"Instead of giving priority primarily to patients who have been on the waiting list longest, the new rules would match recipients and organs to a greater extent based on factors such as age and health to try to maximize the number of years provided by each kidney - the most sought-after organ for transplants.
...
"The ethically fraught potential changes, which would be part of the most comprehensive overhaul of the system in 25 years, are being welcomed by some bioethicists, transplant surgeons and patient representatives as a step toward improving kidney distribution. But some worry that the changes could inadvertently skew the pool of available organs by altering the pattern of people making living donations. Some also complain that the new system would unfairly penalize middle-aged and elderly patients at a time when the overall population is getting older.
...
"Under one scenario, for 80 percent of kidneys, patients 15 years older or younger than the donor would get higher priority. The remaining 20 percent of organs - those deemed to have the best chance of lasting the longest based on the age and health of the donor and other factors - would be given to recipients with the best chances of living the longest based on criteria such as their age, how long they've been on dialysis and whether they have diabetes.
...
"But others worry that the changes could reduce the overall number of organs available for transplants or inadvertently further shift the matches between organs and recipients by affecting living donors, who are not regulated by UNOS. Some relatives who would have donated a kidney to a young patient might now decide not to, for example, putting pressure on other relatives to donate kidneys to older family members. In addition, the changes would do nothing to address the wide variation in waiting times in different parts of the country.

"If we really want to improve things, we need to address the variation in access to transplants based on geography," Ross said. "This factor, more than any other, would increase the overall number of life years gained from kidney transplantation."

Some argued that a better solution would be to give recipients the option of choosing what donor kidneys to accept.

"Some younger people may accept a donor that is higher risk and may not last as long if they could get it sooner," said Richard Freeman, chairman of surgery at Dartmouth Medical School. "It should be more patient-based and less driven by absolute gain in life years."

Others questioned the formula that would be used to match patients and organs. Because the system would be more complicated, it could backfire by creating suspicions of cheating, eroding confidence and reducing organ donations.

"It works well enough the way it is, and everyone understands it, which is important to maintain the public trust," said Benjamin Hippen, a kidney specialist at Metrolina Nephrology Associates in Charlotte."

A U.S. group dating site catches on in India

Jilted in the U.S., a Site Finds Love in India

"IN 2008, three young guys in Manhattan started Ignighter.com, a dating Web site focused on twentysomethings. They sought to set themselves apart by enabling members to set up group dates: One member, serving as a point person, could arrange a date — a movie, say, or a picnic in Central Park — with a group of other people and thereby take some of the awkward edge off of typical dates."
...

“In January 2010, we made the decision that we are an Indian dating site,” Mr. Sachs says. And now, with almost two million users — and 7,000 more signing up daily — Ignighter is considered India’s fastest-growing dating Web site.
"To put it another way, it gets as many users in a week in India as it did in a year in the United States. Next month, Ignighter will open an office in India and hire a dozen local employees. The company has stopped developing its American site, though it remains online.
...
"Ignighter, unlike the matrimonial sites, puts socializing and dating directly into the hands of young people. On most of the matrimonial sites, there’s a drop-down menu for “profile created for” — which includes son, daughter, brother, sister, relative or self. When it comes to Ignighter, “as far as we know, there are not a lot of parents on our site,” Mr. Sachs said.
Matrimonial sites thrive in India. Shaadi.com and others like Jeevansathi.com and Bharat Matrimony all have millions of users. The online matrimonial industry in India is estimated to generate $63 million a year in revenue and has tens of millions of registrants, according to EmPower Research, a market research firm.
“Dating sites have not succeeded in India,” says Gaurav Mishra of the MSL Group, a division of the marketing company Publicis Groupe. “It’s either been social networking sites or matrimonial sites.” Traditional dating sites, like Match.com, haven’t taken off in India. "

"Likely letters" of admission and student athletes at Harvard

The Harvard Crimson describes one of the tools that Ivy League athletic coaches use to recruit student athletes. (The Ivy League faces some self-imposed restrictions, such as no athletic scholarships, that put it at a disadvantage compared to other schools when it comes to recruiting student athletes.)

For Some Athletes, An Early Notice
"In mid-October, when ambitious high school seniors are still anxiously toiling away at their Harvard College application, a select few already have received word of their likely acceptance.
...
"Every year, a group of approximately 200 recruited athletes are offered “likely letters” between Oct. 1 and March 15. While these letters technically do not guarantee an applicant admission to the College, admissions experts agree that a student who receives such a letter would only be denied admission in the most extreme circumstances.

“Barring a severe drop in grade, you can expect to get an offer,” said Penny Deck, an independent college counselor in Virginia.

"While the exact timeline for the recruiting process varies by sport, Harvard coaches say that they make their first contact the summer before a prospective athlete’s senior year of high school.

"From there, it is a hurried process where coaches evaluate a potential player in everything from athletic ability to character so that they can determine who they want to join their team.
...
"Beginning on Oct. 1, Harvard and its Ivy League counterparts can begin issuing likely letters to any of their applicants. While these letters are given to students for a variety of reasons, recruited athletes receive the majority early on in this period.

At Harvard and its Ivy peers, these letters are especially important.

Dave Galehouse, co-author of a guide for high school recruits titled “The Making of a Student Athlete”, said that Ivies are at a disadvantage because they do not offer special binding admissions decisions to student athletes.

According to Galehouse, the athletic programs at many other Division I institutions can essentially guarantee a student’s acceptance at their schools. He said he believes likely letters are a way to compensate for that disadvantage.

“It’s challenging for [Ivy League schools] because other schools can give notice earlier than we can,” said Ivy League Executive Director Robin Harris.


Since the elimination of early action*, Harvard has lost another tool to assure athletes—many of whom receive time-sensitive offers from other schools—that Harvard will admit them.

“Now that we don’t have our early action program, it’s very important to have likely letters,” said Harvard women’s volleyball coach Jennifer Weiss. “We’re still competing against schools that [do].”

“People are making decisions early. They can’t hold out a decision from Harvard until April,” said Weiss, the wrestling coach.

The Commitment Question

The Ivy League has minimal rules governing how its member institutions can utilize the likely letter, according to Harris. Still, the rules that exist are clear. While coaches may inquire as to a student’s level of interest, they cannot require a commitment or suggest that the applicant’s admission be contingent upon a commitment, according to the league’s website.

Dean of Admissions and Financial Aid William R. Fitzsimmons ’67 said that Harvard not only follows the rule, but takes the principle one step further.


“We don’t really ask them or inquire [whether they plan on coming]. It’s not an issue,” he said. “To have a likely be binding would be antithetical to our admissions philosophy.”


"Despite acknowledging the Ivy League policy of not requiring a commitment, Galehouse said that coaches do gauge interest levels before submitting their preferences to the admissions office.


“If coaches are going to go to bat for you, they want a pretty strong commitment,” he said of his understanding of the process in the Ivies. “You’re not really supposed to be going after likely letters from multiple schools. Coaches talk.”


"Fitzsimmons acknowledged that few recruited athletes who receive likely letters from Harvard end up attending other institutions.

“A pretty high percentage of the athletes end up coming,” he said, adding that the trend can be attributed to a bond that recruits feel to the coach or the institution, not because Harvard requires any sort of commitment.

“It’s up to them whether they keep their applications in elsewhere,” Fitzsimmons said. “We’ve certainly had athletes who received likelies who end up not coming.”

*but see yesterday's post on the return of early admissions to Harvard

Early admission returns to Harvard and Princeton

The Crimson reports that Harvard cares about equilibrium:  Harvard Announces Return of Early Action Admissions Program

"Harvard College announced the return of its non-binding early action admissions program, which was eliminated in 2007 due to concerns that it posed a disadvantage to low-income applicants.

"The announcement comes after the University of Virginia—which, along with Princeton, followed Harvard in deciding to eliminate early admissions programs in the fall of 2006—rolled out a new early action program in November.

"University President Drew G. Faust said in a statement that the return of early action, an admissions practice which Harvard had previously called unfair to students from disadvantaged backgrounds, is now “consistent with our bedrock commitment to access, affordability, and excellence.”

"The program will return this fall for the class of 2016.

"Dean of the Faculty of Arts and Sciences Michael D. Smith said in the same statement that offering an accelerated decision cycle for interested applicants would increase Harvard’s potential to attract top-caliber students. He said, “We looked carefully at trends in Harvard admissions these past years and saw that many highly talented students, including some of the best-prepared low-income and underrepresented minority students, were choosing programs with an early-action option, and therefore were missing out on the opportunity to consider Harvard.”

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

The NY Times picks up the story: Harvard and Princeton Restore Early Admission

"Harvard and Princeton each announced yesterday that they would revive their early-admission programs, allowing high school seniors who apply by next Nov. 15 to get a decision by Dec. 15 without having to promise to attend the college if admitted.

"In September 2006, when both universities decided to eliminate early admissions for those starting college in 2008, Harvard and Princeton said they wanted to start a trend that would help even the playing field between wealthy applicants and those who needed to compare financial-aid offers from different colleges. But only the University of Virginia followed their lead — and it announced last year that it would reinstate early admissions.

“In eliminating our early program four years ago, we hoped other colleges and universities would do the same, and they haven’t,” said Shirley M. Tilghman, Princeton’s president. “One consequence is that some students who really want to make their college decision as early as possible in their senior year apply to other schools early, even if their first choice is Princeton.”

Meanwhile, with the economic downturn, a growing number of applicants sought early admission, leading the universities who had abandoned their programs to lose out on some top students.

“The very people we were targeting, people from modest economic backgrounds, were sent into a high state of anxiety and uncertainty by the economy and it reached the point where, this past year, record numbers of people were applying early,” said William R. Fitzsimmons, Harvard’s dean of admissions. “At many high schools it was very common to have 60, 70, 80 percent of the students applying early, and we heard rumors that in some cases, it went up to 100 percent.”
...
"According to David Hawkins, director of public policy and research at the National Association for College Admission Counseling, about a quarter of four-year colleges offer early decisions, whether through nonbinding early action or binding early decision.

“Particularly at these institutions with these highly motivated students, the desire for some kind of early decision is not likely to abate,” Mr. Hawkins said. “There is anxiety around the college admissions process, and a bird in the hand is worth two in the bush.”

"Few colleges — Stanford and Yale among them — offer the kind of single-choice, nonbinding early-action program that Harvard and Princeton will use, in which students may apply early to only one college.

“A single-choice early-action plan lets students tell us we’re their first choice, so we get a start on building the class,” said Janet L. Rapelye, Princeton’s dean of admission. “At the same time, it allows them to apply to other schools, and for students who need a generous financial aid package, gives them freedom to compare, so it’s a win-win for them.”

**********

Note that "single choice early action" requires that a student apply to no more than one plan early, so it is a signaling device rather than (also) a binding commitment (as binding early decision plans are).

***********
The Globe picks up the story:

"Harvard professor Richard Zeckhauser, coauthor of the book “The Early Admissions Game,’’ said yesterday that the university was bound to back away from the abolition of early admissions when it became clear that competitors were not following suit.


“Having Harvard and Princeton get rid of early admissions and having our principal competitors retain it is the equivalent of unilateral disarmament,’’ Zeckhauser said. “There is too much of a disadvantage of being just one of two or three schools among the elite schools not to offer a program that all the other schools offer.’’

...
"In the past, students who applied early to Princeton and the University of Virginia were obligated to attend if admitted. Under their renewed early admissions programs, admitted students would no longer be bound to the universities.
"Yale and Stanford also have nonbinding early admissions programs. But early applicants admitted to Cornell, Columbia, Dartmouth, Brown, and the University of Pennsylvania must promise to attend.

"Some college counselors welcomed Harvard’s and Princeton’s decisions, since more students are seeking early admissions options. Nearly a third of the senior class at Newton North High School had applied to a college by Nov. 1, said Brad MacGowan, a college counselor.
“With all the pressure and the uncertainty around college admissions, applying early gives them a little control,’’ said MacGowan. “They like the idea they can let a college know that it is their top choice.’’

The Justice Department will no longer defend the Defense of Marriage Act

Same sex marriages in states where they are legal, like Massachusetts, will no longer automatically be opposed by the federal government as various challenges make their way through the courts.
Obama Orders End to Defense of Federal Gay Marriage Law

"President Obama, in a major legal policy shift, has directed the Justice Department to stop defending the Defense of Marriage Act — the 1996 law that bars federal recognition of same-sex marriages — against lawsuits challenging it as unconstitutional.

"Attorney General Eric H. Holder Jr. sent a letter to Congress on Wednesday saying that the Justice Department will now take the position in court that the act should be struck down as a violation of same-sex couples’ rights to equal protection under the law.

“The president and I have concluded that classifications based on sexual orientation warrant heightened scrutiny and that, as applied to same-sex couples legally married under state law,” a crucial provision of the act is unconstitutional, Mr. Holder wrote.

"The move is sure to be welcomed by gay-rights advocates, who had often criticized Mr. Obama for moving too slowly in his first two years in office to address issues that concern them. Coming after the administration successfully pushed late last year for repeal of the military’s ban on gay men and lesbians serving openly, the change of policy on the marriage law could intensify the long-running political and ideological clash over same-sex marriage as the 2012 presidential campaign approaches.

"While Mr. Obama has long argued that the Defense of Marriage Act is bad policy and has urged Congress to repeal it, his administration has also sent Justice Department lawyers into court to defend the statute’s constitutionality.

"The new position will require the administration to file new briefs in such litigation, including a major case now pending before the United States Court of Appeals for the First Circuit, in Boston."

Tourism-crime equilibrium in Paradise

"It is best to not leave anything of value in your rental car when parking in remote locations or at marked public beach accesses. Leave your car unlocked so thieves do not need to break the windows to discover there is nothing inside worth stealing."

That is the sensible, equilibrium advice to tourists on the (low crime)  island of Providenciales in Turks and Caicos Islands, where I recently had the opportunity to spend a week contemplating tourism as a development strategy for Caribbean nations. Here's a sign in three languages (the middle one is Creole) alerting crooks to watch out. (Creole looks sort of like French if you squint at it, and seems not to have a passive voice like the other two--the French parts says something like "everyone who sees ... something not good, immediately call the police"

The islanders discovered tourists (and Europe) in 1492 when Columbus landed.  The islanders are called "belongers," e.g. when you come through immigration there are lines for "belongers and residents" and other lines for visitors. Most belongers are descended from African slaves who worked the salt pans and cotton plantations of an earlier economy.

Looks like a great place for a satellite university campus...

NYC school choice--cost overruns

David Chen in the NY Times has an article on cost overruns for the new school choice system which includes the high school choice system that Atila Abdulkadiroglu, Parag Pathak, and I helped design. (This is a good place to point out that we did our work pro bono--we didn't charge a penny. What we did get was the relevant choice data and the freedom to use it when we published papers based on our work.) More on our collaboration with NYC Dept of Ed, and our interaction with one of their software vendors, after the Times story, at which point I'll also draw some lessons about software vendors for school districts interested in designing better school choice systems. The article makes clear that the new high school choice system in NYC is viewed as a great success, but that the city had big problems with its software contractors.

Cost Overruns Found in Technology for Placement of High School Students

"For the last several years, the city’s Department of Education has boasted about its record of placing students in the high schools of their choice, thanks to a new computerized process. But if the ends were successful, the means were anything but, according to the city comptroller.

"In an audit released Thursday, the comptroller, John C. Liu, criticized the department’s handling of the finances of the computer system, which is modeled after a system that matches medical school graduates with residency programs.

"Instead of adhering to its original contract of $3.6 million for the system’s development, the audit found, the department spent $13.5 million. Then the original project was deemed insufficient and it had to be scrapped and the city had to spend an additional $9.4 million — and counting — for a new system.

"The gulf of more than $19 million between expected and projected costs reflected “poor planning” and raised concerns, the comptroller’s office said, about “similar cost overruns” for all technology projects.

"The city’s original contract was with Spherion, a company whose reputation was sullied in December when several of its consultants were indicted by federal prosecutors. The consultants were accused of concocting an $80 million corruption scheme related to another technological initiative, an automated payroll system called CityTime. The city hired a new vendor for the Education Department in 2008.

"In a letter to Cathleen P. Black, the schools chancellor, H. Tina Kim, the city’s deputy comptroller for audits, wrote, “Clearly, savings could have been achieved with better planning and coordination.”
...
"In response to the audit, city officials said that fast-moving changes in facets of education had necessitated upgrades — at additional costs — to the computer system. The program had to accommodate middle-school choices, prekindergarten admissions and programs for gifted elementary-school children.

"Jack Zarin-Rosenfeld, a spokesman for the Education Department, said: “Before this administration, we had a high school admissions system that was rife with political patronage and too often gamed by the well-connected, leaving students with the most need behind. Thanks to our policy changes and investments, we have greatly expanded equity and choice for all of our families, and provided more high-quality opportunities on a scale larger than any other city in the country.”

"With the advent of mayoral control of the schools shortly after Mr. Bloomberg took office in 2002, the Education Department overhauled the nerve-wracking and lotterylike process by which students were admitted to high schools. In the past, students could select only five schools, but some students were admitted to more than one, leaving the city’s best students to mull over their options after applying. But under the new High School Application Processing System, students are allowed to list 12 choices, and are matched to just one school.

"For the 2010-11 school year, 52 percent of the roughly 80,000 high-school-bound students who applied were matched to their first choices; in 2004, by contrast, that figure was 33.6 percent.

"In 2005, Joel I. Klein, then the schools chancellor, praised the new system, saying “this process, frankly, was a long time quite broken.”

"The original contract was amended eight times between 2003 and 2008, adding almost $10 million in costs, chiefly to adjust to changes in school policies. And those amendments, according to Ms. Kim’s letter, “reflect poor planning” and “appear to be an admission that the changes that occurred in D.O.E. were not expected or considered” in developing the new system.

"By 2008, the city had concluded that it needed a new vendor to develop a new and more flexible technology system, and hired Vanguard Direct Inc., under a contract expiring in 2013. "

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

The story reminds me of how in 2003, when I was first contacted by Jeremy Lack at the New York City Department of Education and asked to design a choice process, the city had already contracted with Spherion to be its software provider. It quickly became apparent that Spherion's core competence was getting contracts with the city. There were a number of indications that they were going to be difficult to work with. Two incidents stand out in my memory.

First, Spherion had prepared a plan that called for programming lots of modules to knit together different aspects of school choice. I recall a conference call in which several Spherion people participated together with Jeremy Lack, me and Parag Pathak, in which Parag and I pointed out that the (deferred acceptance algorithm) architecture we proposed would require vastly less programming to accomplish than the original contract allowed for. One of the Spherion people pointed out that, in that case, a contract modification would have to be negotiated, at additional cost to the city.

Second, the way the project progressed is that, as we agreed on particular design elements, Parag and Atila would each program a version (in Matlab and Perl, respectively) that they would check against each other by running test problems, and the algorithm would be passed on to Spherion. At one point we asked Spherion how they were planning to check that their programming was accurate, and they replied that checking the software wasn't called for in the contract (and, besides, they explained, there was a logical inconsistency in the notion that you could check the accuracy of software, since you would have to design software to do that, and that software would have to be checked...). So Parag and Atila did the software checking too.

Of course we programmed only the fun stuff, the choice algorithm, and a delivered system has to have lots of data entry and processing software, so that preference lists can be entered by middle school guidance counselors, etc. Still, I'm staggered by the cost figures reported by the Times. It's hard to imagine that a gold plated system, with 100% profit margins for the contractors, couldn't have come in at 10% of the reported cost.

Part of the problem, I suspect, is that the contract with Spherion didn't give the software to NYC, but left it with Spherion which was supposed to run the match, which I think increased charges each year. When we subsequently helped Boston redesign its school choice algorithm (with Tayfun Sonmez now also playing a critical role on the team), we worked in a similar way, but Boston ended up owning the software and running the match itself. This is a better financial/ownership model.

Neil Dorosin, the NYC DOE official who had the hands-on responsibility for implementing the new high school match, subsequently left the DOE to form a non profit institute to help school districts implement choice plans, the Institute for Innovation in Public School Choice (IIPSC). Atila, Parag and I are on his Board. Building on his considerable NYC experience, Neil probably now knows as much as anyone about the details of building a school choice system, and how the parts fit together, based on his experience not only in NY but in school districts around the country with whom he's been in contact.


Here's a paper in which the NYC high school choice system is described in detail, along with some details of its performance:
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 Software

Matching college students to internships

That's the goal of a web based portal called Intern Match.

Here's an announcement about them from TechCrunch: InternMatch Raises $400K To Help Students Find The Perfect Internship

"InternMatch wants to replace the career fair for college students who want internships at small and mid-size companies. On InternMatch’s platform, both internship seekers and employers can search for a match, receive skill and location based matching recommendations, and access tools to manage the application process (i.e. tips for resume creation, internship preparation, and more).

"For companies, InternMatch provides a match guarantee—if an employer doesn’t find an intern within 60 days, they get a full refund. The startup wants to set itself apart from competition by focusing on regional growth and by providing a dead simple UI where students can search and apply to positions without registration. Already, InternMatch has thousands of west coast opportunities are already available."

HT: Eric Budish

Calls for unraveling of Ph.D. education may be premature

At least that is the conclusion of an article by Joshua Tucker of NYU's department of Politics that appeared at Inside Higher Ed, Academe as Meritocracy.

He takes issue with recent calls (including this one in The Economist, that's gotten a lot of attention) to limit the number of Ph.D. students, so that the number of new Ph.D.s would better match the number of new academic positions. He writes:
"As I was reading this article, I was trying to reconcile the horrors of academia**** with the fact that I will soon be slogging through hundreds of applications for potential grad students who will want something like one of the 25-30 slots we will offer for our next Ph.D. class. Could I in good conscience actually admit any of these students? I mean, after all, they must clearly be deceiving themselves into thinking this could lead to a good career. Unless, of course, they turn out like one of our students this year who has job offers at multiple top universities. Or our other students who went on the market this year and landed good jobs. Or one of my students who didn't even apply for an academic job, but wound up at a top-notch consulting firm. Or the excellent Ph.D. students from other universities we've just hired. They've turned out O.K., haven't they? Would they have been better off had some well-meaning admissions offer turned off the spigot at the source and only admitted a quarter of the graduate students to NYU that we actually admitted? Maybe they would have been at the top of their class, but maybe not.
...
"And this, perhaps, is why it is not a bad thing that we admit more Ph.D. students to programs than we have jobs for as university professors. Because the alternative is that we have to decide a lot earlier who is going to be good and who is going to be bad. If I can admit 20 students to the Ph.D. program at NYU next year, then that is 20 students who have a chance to shine. They may not all make it, but it is worth considering whether we are better off giving those 20 students a chance then picking now -- based solely on their undergraduate record -- only five who will be given a chance.

xkcd comic on kidney transplantation

http://xkcd.com/749/

Relative manipulability of school choice systems

That's the topic of a new NBER working paper by Parag Pathak and Tayfun Sönmez:

SCHOOL ADMISSIONS REFORM IN CHICAGO AND ENGLAND: COMPARING MECHANISMS BY THEIR VULNERABILITY TO MANIPULATION, Working Paper 16783.

Abstract: In Fall 2009, officials from Chicago Public Schools changed their assignment mechanism for coveted spots at selective college preparatory high schools midstream. After asking about 14,000 applicants to submit their preferences for schools under one mechanism, the district asked them re-submit their  preferences under a new mechanism. Officials were concerned that "high-scoring kids were being rejected simply because of the order in which they listed their college prep preferences" under the abandoned mechanism. What is somewhat puzzling is that the new mechanism is also manipulable.
This paper introduces a method to compare mechanisms based on their vulnerability to manipulation. Under our notion, the old mechanism is more manipulable than the new Chicago mechanism. Indeed, the old Chicago mechanism is at least as manipulable as any other plausible mechanism. A number of similar transitions between mechanisms took place in England after the widely popular Boston mechanism was ruled illegal in 2007. Our approach provides support for these and other recent policy changes involving matching mechanisms.

Lawsuit against ban on compensating bone marrow donors moves forward

Compensating Bone Marrow Donors Could Save Lives But the Government Bans It



"Arlington, Va.—Every year, nearly 3,000 Americans die because they cannot find a life-saving bone marrow donor match—a trend that disproportionately impacts minorities.  But on Tuesday, Feb. 15, 2011, cancer patients from across the nation who can’t find a donor match will square off in court against the U.S. Attorney General seeking to strike down part of a federal law that bans anyone from offering even modest compensation to bone marrow donors.  If the cancer patients are successful in their suit, compensation could be offered to those who donate bone marrow, thus attracting more donors and saving more lives.

This video (appears above) explains the life-or-death legal battle:
http://www.youtube.com/watch?v=RMcXvMxVFUA"

...

"Under the National Organ Transplant Act (NOTA) of 1984, giving a college student a scholarship or giving a new homeowner a mortgage payment for donating marrow could land everyone—doctors, nurses, donors and patients—in federal prison for up to five years.  NOTA’s criminal ban violates equal protection because it arbitrarily treats renewable bone marrow like nonrenewable solid organs (such as kidneys) instead of like other renewable or inexhaustible cells (such as blood) for which compensated donation is legal.  Unlike organs such as kidneys, donated bone marrow replenishes itself in just a few weeks after it is donated, leaving the donor whole once again."

HT: Greg Mankiw

Medieval Matching Markets

That's the title of a working paper by Lars Börner and Daniel Quint, studying brokerage rules developed by central and western European towns in the years from 1200 to the 1600: their map is below. Traveling merchants would either have the option or be required to deal with local brokers, who operated by a number of different rules (e.g. in some towns they could only act as brokers and could not engage in private deals on their own behalf). The paper analyzes the brokerage rules in a two-sided matching framework, in which considerations of stability are important to the brokers either to avoid having merchants do without brokers, or to avoid having them go to other brokers.

Here's the abstract:
"This paper studies the market microstructure of pre-industrial Europe. In particular we investigate the institution of the broker in markets and fairs, and develop a unique data set of approximately 1100 sets of brokerage rules in 42 merchant towns in Central and Western Europe from the late 13th to the end of the 17th century. We show that towns implemented brokerage as an efficient matchmaking institution in a two-sided market problem. Furthermore, towns differentiated seller-friendly from buyer-friendlier matching mechanisms. We show that the decision to implement matchmaking mechanisms, and whether these mechanisms would be buyer- or seller friendly, depends on the products in question and the stated policy goals of the town, as well as time and geographic variables."

Two faces of kidney transplantation

Two men who have played significant roles in kidney transplantation are both named Sonmez.

One is the great Boston College economist Tayfun Sonmez, one of the pioneers of kidney exchange.

The other is the (also) Turkish kidney transplant surgeon Yusuf Sonmez, who is once again in the news for his alleged role in both kidney black markets and in war crimes in Kosovo. In a recent interview in the NY Times, focusing primarily on the black market allegations, he is asked about both the recipients and the donor/vendors: Monster or Savior? Doctor Draws New Scrutiny.

“There are two Yusufs, one my family and friends know and the one created in the press who is a monster— this is a drama, a tragedy,” said Dr. Sonmez, 53, a trim, angular man with intense, gray-green eyes and a graying goatee. “Up to now, I didn’t kill anybody. I didn’t harm anybody, counting donors or recipients. I have not committed any kind of social harm to anyone. This is the main thing that I am proud of.”
...
"Dr. Sonmez is wanted with regard to one of the most troubling prosecutions to emerge recently— a European Union investigation into trafficking in Kosovo in which seven people, mostly prominent local doctors, have been charged with illegal kidney transplants in a private clinic. Dr. Sonmez has not been charged in Kosovo, but the prosecution contends he played a central role in the ring.


"That case has become intertwined with a volatile two-year Council of Europe inquiry that made links between the Kosovo prime minister, Hashim Thaci, and a criminal enterprise of some former Kosovo Liberation Army fighters accused of executing Serbian prisoners in 1999 and 2000 for their organs.

"Dr. Sonmez has denied wrongdoing in either situation, but a Turkish immigrant who lost consciousness at an airport in Kosovo after a kidney removal, and the patient who investigators say received his kidney, both identified Dr. Sonmez as part of the operating team. He says he was only in the operating room offering advice to others.


"Investigators have focused on the role of Dr. Sonmez in 2008 as a surgeon for the Medicus private clinic in a rundown neighborhood in Pristina, Kosovo’s capital, where they said kidneys were removed from impoverished immigrants recruited on false promises of payment that they never received. The organs were transplanted to wealthy patients from Canada, Germany, Poland and Israel who paid up to €90,000, or $122,000.
...
"By his estimate, most of the thousands of transplants he has performed since he began in 1992 involved live, unrelated donors. He said his survival rate was high because he presided over the removal and transplant of kidneys, monitoring patients side by side for 48 hours.


“This is amazing,” he said of the transplant process. “I love it — to watch the changes with the new organ, the changes in the body, to move with the changes, to make changes in the medication.”

"Typically, he said, he requires donors and recipients to submit signed, notarized statements to declare that money has not been exchanged.


"How does he know that desperately poor kidney donors are not being exploited by a murky world of brokers, fixers and wealthy donors with lavish insurance?

“I don’t need to ask these questions,” he said, “because I do believe that people have their own authority over their own body. They are not stealing, they are not cheating. So this is the shame of the system. Not their shame.”
...
"In the next few weeks, Dr. Sonmez and his lawyer are poised to head to Kosovo to give his statements.


“They want information about bigger fish,” said Murat Sofuoglu, an old friend and lawyer for Mr. Sonmez, who has been shuttling between Istanbul and Pristina to negotiate terms for the doctor to give a statement to prosecutors.

“Not me,” Dr. Sonmez said, picking at a honey-drenched piece of baklava. “I am not the big fish.”

The computer revolution recapitulates the sexual revolution

When I was young, computers could only be accessed within well defined institutions (like university computer centers), with approved software. But then personal computers became available, and pretty soon we were all computing promiscuously, at home and in the office, with third party software (unless we were Apple users, in which case we still used approved software).  And computing wasn't just for data and work anymore, it was also for fun, something you could do spontaneously.

The internet only accelerated things. Old barriers broke down.

Then came viruses. Strange software wasn't safe anymore, you could catch something that could really harm you. And you could pass it on to your correspondents and collaborators if you were infected. You had to be careful with whom you traded bits and bytes.

Today Apple is back in vogue; iPhone apps are approved software. We all have virus scanners, and our IT checkups may now include routine tests for infection. Our junk mail filters try to protect us from inappropriate contact. We practice safe computing.

Misc. kidney exchange

A press release from Georgetown University Hospital reports that half of their kidney transplants now arise from kidney exchange: Transplant Numbers Show New Kidney Exchange Program Increased the Rate of Kidney Transplants at Georgetown Two-Fold Since 2008

I recently returned from talking about kidney exchange in Milan. Eliana La Ferrara of Bocconi U. points out the following news story summarizing the current situation (in Italian): Fazio: sì alla donazione d'organi da parte di «samaritani» . It says that the transplant law in Italy has recently been changed to allow live donations by donors who are not close relatives, and it seems to suggest that the first transplants allowed under the new law should be two-way kidney exchanges. It also notes that the waiting list for kidney transplants in Italy recently had about 9,000 people on it, and that in 2009 there were about 1,700 transplants, of which only a few dozen were from living donors.

An Australian parliamentarian, Catherine King, writes about the first kidney exchange in the Australian Paired Kidney Exchange (AKX) program:

The American Medical News writes about the pilot National Kidney Paired Donation program in the U.S.:
Kidney exchange program makes 1st matches: The United Network for Organ Sharing brings together incompatible donor-recipient pairs through a national pool. Mike Rees and I are both briefly quoted on some of the obstacles that still need to be overcome to make that program a success on a large scale.

Scripps News service carries a story about the pilot National Kidney Paired Donation program, emphasizing the role played by CMU's Tuomas Sandholm: Computer algorithm matches unrelated donors, kidneys

In Canada, they are asking Who should travel in kidney exchange programs: the donor, or the organ?
Marie-Chantal Fortin, Bryn Williams-Jones , Open Medicine, Vol 5, No 1 (2011)

"In 2009 the Canadian Blood services launched the Living Donor Paired Exchange Registry. This program circumvents the obstacle presented by blood-group or immunologic incompatibility between a living potential donor and his or her intended recipient. At the beginning, only 3 provinces joined the program, but as of October 2010 all Canadian provinces are participants. Up to now, participating donors have travelled to recipients’ transplant centres. We might question whether, in a country such as Canada, the donor or the organ should travel. In this article, we review the arguments for donor travel and the arguments for shipping the kidney."


Preliminary, still partial evidence from the U.S.  suggests It's Okay to Ship Live-Donor Kidneys
"Transporting live-donor kidneys, sometimes over great distances, does not appear to have a negative effect on transplantation outcomes, researchers found."
And here's a gated link to the paper in the AJT:
Transporting Live Donor Kidneys for Kidney Paired Donation: Initial National Results, D. L. Segev1,2,*, J. L. Veale3, J. C. Berger1, J. M. Hiller1, R. L. Hanto4, D. B. Leeser5, S. R. Geffner6, S. Shenoy7, W. I. Bry8, S. Katznelson8, M. L. Melcher9, M. A. Rees10, E. N. S. Samara11, A. K. Israni12, M. Cooper13, R. J. Montgomery1, L. Malinzak14, J. Whiting15, D. Baran16, J. I. Tchervenkov16, J. P. Roberts17, J. Rogers18, D. A. Axelrod19, C. E. Simpkins1, R. A. Montgomery1
Article first published online: 10 JAN 2011

Will reputation and crowd sourcing facilitate alternative forms of peer review?

That's the question raised in a (gated) article in the Chronicle of Higher Education about a proposal to publish papers online, and then have them subject to comment: 'Facebook of Science' Seeks to Reshape Peer Review

"Mr. Tracz plans to turn his latest Internet experiment, a large network of leading scientists called the Faculty of 1000, into what some call "the Facebook of science" and a force that will change the nature of peer review. His vision is to transform papers from one-shot events owned by publishers into evolving discussions among those researchers, authors, and readers.
...
"The core function of F1000 is to allow members to highlight any newly published paper that they consider interesting and give it a points rating of six (recommended), eight (must read), or 10 (exceptional). Many members give network access to a junior colleague who helps them rate publications.


"Members say in a sentence or two why they find the paper interesting. Readers then are able to attach their own comments to the F1000 site. (Authors can appeal comments they consider unreasonable.)
...
"For Mr. Tracz, this objective leads inevitably back to the more grandiose goal of upending the existing publishing system. "There are two big issues, for science and for publishing," he says. "One is peer review, and one is the publishing of data." While many researchers and publishers consider prepublication peer review to be, at worst, a necessary evil, Mr. Tracz is scathing about its weaknesses. "Except for a tiny little part at the top, where it is done seriously, peer review has become a joke. It is not done properly, it delays publication unnecessarily, it is open to abuse, and is being abused. It is seriously sick, and it has been for a while."