Eric Budish on the economics of cryptocurrencies (video of his Harris Lecture at Harvard)

 If you haven't heard Eric Budish talk about crypto, this is your chance:  here's the video of his Harris Lecture at Harvard: The Economics of Cryptocurrencies by Eric Budish

(It was delivered before the recent collapse of the FTX exchange.)

NBER Market Design Working Group Meeting, Fall 2022, at Stanford, today and tomorrow

 While I'm away, the NBER Market Design meeting will convene at Stanford today and tomorrow.  The first paper is presented by Alex Chan (who you could hire, he's on the market).

Market Design Working Group Meeting, Fall 2022  November 4-5, 2022 (US Pacific Time) (more papers are linked at the above link and all presentations will be livestreamed on YouTube at https://www.youtube.com/nbervideos)

LOCATION Stanford University Graduate School of Business, Vidalakis Dining Hall, Schwab Residential Center, 680 Jane Stanford Way, Stanford, CA and YouTube 

ORGANIZERS Eric Budish, Jakub Kastl, and Marzena Rostek

 NBER conferences are by invitation. All participants are expected to comply with the NBER's Conference Code of Conduct.

Friday, November 4

Session 1. Matching Markets

9:00 am

Regulation of Organ Transplantation and Procurement: A Market Design Lab Experiment by Alex Chan, Stanford University and Alvin E. Roth, Stanford University and NBER

Measuring the Welfare Gains from Cardinal-Preference Mechanisms in School Choice(slides)  by Hulya Eraslan, Rice University and NBER by Jeremy T. Fox, Rice University and NBER, YingHua He, Rice University, Yakym Pirozhenko, Rice University

10:20 am Coffee Break

Session 2. Markets and Algorithms

11:00 am Market Opacity and Fragility by Giovanni Cespa, City University London, Xavier Vives, IESE Business School

Artificial Intelligence and Pricing: The Impact of Algorithm Design by John Asker, University of California, Los Angeles and NBER Chaim Fershtman, Tel Aviv University, Ariel Pakes, Harvard University and NBER

12:20 pm  Lunch - Vidalakis Courtyard

Session 3: Young Scholars Session I: Financial Market Design

2:00 pm Intermediary Asset Pricing: Capital Constraints and Market Power(slides), Jason Allen, Bank of Canada, Milena Wittwer, Boston College

Endogenous Market Structure: Over-the-Counter versus Exchange Trading by Ji Hee Yoon, University College London

3:20 pm Coffee Break

Session 4: Young Scholars Session II: Market Design Theory

4:00 pm Strategyproofness-Exposing Mechanism Descriptions, by Yannai A. Gonczarowski, Harvard University, Ori Heffetz, Cornell University and NBER, and Clayton Thomas, Princeton University

Matching and Prices by Ravi Jagadeesan, Stanford University, Alexander Teytelboym, University of Oxford

Saturday, November 5

Session 5. Non-Market Allocation Mechanisms

9:00 am Optimal Queue Design by Yeon-Koo Che, Columbia University, Olivier Tercieux, Paris School of Economics

Fraud-proof Non-market Allocation Mechanisms by Eduardo Perez-Richet, Sciences Po, Vasiliki Skreta, UT Austin & UCL

10:20 am Coffee Break

Session 6. Environment and Transportation

11:00 am Pollution Permits: Efficiency by Design by Marek Pycia, University of Zurich, Kyle Woodward, University of North Carolina

Optimal Urban Transportation Policy: Evidence from Chicago(slides) by Milena Almagro, University of Chicago, Felipe Barbieri, University of Pennsylvania, Juan Camilo Castillo, University of Pennsylvania, Nathaniel G. Hickok, Massachusetts Institute of Technology, Tobias Salz, Massachusetts Institute of Technology and NBER

12:20 pm Lunch - Vidalakis Courtyard

Session 7. Auctions and Mechanism Design

This session: 25 minutes presenter, 5 minutes Q&A.

1:30 pm Screening with Persuasion by Dirk Bergemann, Yale University, , Tibor Heumann, PUC Chile, Stephen Morris, Massachusetts Institute of Technology

Auctions with Frictions by Stephan Lauermann, University of Bonn, Asher Wolinsky, Northwestern University

Pure-Strategy Equilibrium in the Generalized First-Price Auction, by Michael Ostrovsky, Stanford University and NBER, Andrzej Skrzypacz, Stanford University

Market design workshop at Iowa State University

 I'll give a public talk this evening to open a market design workshop tomorrow and Saturday:

Two-day Workshop: September 23-24, 2022, Heady Hall 360A, Iowa State University

Organizers: Ran Shorrer, Bumin Yenmez, Bertan Turhan  

Program: MARKET DESIGN WORKSHOP PROGRAM

Day 1: Friday, September 23, 2022 (Heady Hall 368A)

SESSION 1

8:00-8:40 Rakesh Vohra (w/ Thanh Nguyen)

“(Near) Substitute Preferences and Equilibria with Indivisibilities”

8:40-9:20 Federico Echenique (w/ Sumit Goel and SangMok Lee)

“Stable Allocations in Discrete Economies”

9:20-10:00 Marzena Rostek

“Decentralized-Market Design”

Chair: Tarun Sabarwal

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

BREAK: 10:00-10:30

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SESSION 2

10:30-11:10 Karam Kang (w/ Giulia Brancaccio)

“Search Frictions and Product Design in the Municipal Bond Market”

11:10-11:50 Mariana Lavarde

“Distance to Schools and Equal Access in School Choice Systems”

11:50-12:30 Atila Abdulkadiroğlu (w/ Aram Grigoryan)

“Priority-based Assignment with Reserves and Quotas”

Chair: David Cooper

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

LUNCH: 12:30-1:40 (Heady 360)

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SESSION 3

1:40-2:20 Bumin Yenmez (w/ Isa Hafalir and Fuhito Kojima)

“Design on Matroids: Diversity vs Meritocracy”

2:20-3:00 Orhan Aygün (w/ Bertan Turhan)

“Affirmative Action in India: Restricted Strategy Space, Complex Constraints, and

Direct Mechanism Design”

3:00-3:40 Nick Arnosti

“Explainable Affirmative Action”

Chair: Atila Abdulkadiroğlu

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BREAK: 3:40-4:10

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SESSION 4

4:10-4:50 Eric Budish

“The Economic Limits of Bitcoin and Anonymous, Decentralized Trust on the Blockchain”

4:50-5:30 Eduardo Azevedo (w/ David Mao, Jose Montiel Olea, and Amilcar Velez)

“A/B Testing with Gaussian Priors”

5:30-6:10 Ran Shorrer (w/ Yannai Gonczarowski and Scott Kominers)

“To Infinity and Beyond: Scaling Economic Theories via Logical Compactness”

Chair: Al Roth

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

Day 2: Saturday, September 24, 2022

SESSION 5

8:00-8:40 Thayer Morrill (w/ Peter Troyan)

“Desirable Rankings: A New Method for Ranking Outcomes of a Competitive Process”

8:40-9:20 Lars Ehlers (w/ Christian Basteck)

“Strategy Proof and Envy-Free Random Assignment”

9:20-10:00 Itai Ashlagi (w/ Jacob Leshno, Pengyu Qian, and Amin Saberi)

“Price Discovery in Waiting Lists: A Connection to Stochastic Gradient Descent”

Chair: Rakesh Vohra

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BREAK: 10:00-10:30

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SESSION 6

10:30-11:10 Josue Ortega (w/ Thilo Klein)

“Improving Efficiency and Equality in School Choice”

11:10-11:50 Aram Grigoryan

“Transparency in Allocation Problems”

11:50-12:30 Inácio Bó (w/ Rustam Hakimov)

“Pick-an-Object Mechanisms”

Chair: Federico Echenique

Further unraveling of law firm offers to (first year) law students, and offers to new (first week) bankers from private equity

Eric Budish writes with a pointer to a Business Insider story on the current unraveling of the market for new lawyers and big law firms.

Inside the 'Wild West' of law-school recruiting that has Big Law reeling in talent earlier and more aggressively than ever

"this year, some legal-industry professionals say the competition has gotten out of control.

"Latham & Watkins, which hires about 300 students a year for its 10-week summer program, has told law schools that it has made 2023 summer-job offers to so many students ahead of the traditional period for on-campus interviews, or OCI, that it expects to conduct fewer OCI interviews this year, three people familiar with the firm's strategy said.

"Other elite firms — including Weil, Skadden, and Davis Polk — have also been making large numbers of early offers. At Simpson Thacher, a partner said, "We probably did half our interviewing before the formal OCI process."

"Working at a law firm after a student's second year, or 2L, has long been a rite of passage for students bound for Big Law. "Summer associates" are paid about $4,000 a week at top firms and get the chance to do legal research, eat nice meals on the company's dime, and meet the people they'll likely be working with after graduation — because upwards of 90% of them get an offer to return full time.

...

"Some law students are now entering recruiting talks in the spring of their 1L year. School administrators say it's often the students who get the ball rolling by submitting résumés via a firm's website after meeting a partner at a school meet and greet.

...

"Stanford and the University of Pennsylvania still ban pre-OCI recruiting, their websites said. Other schools require pre-OCI offers to stay open until OCI, so a student can compare firms. But not all firms respect the rules, and students sometimes are afraid to invoke them, said David Diamond, an assistant dean at Northwestern University's Pritzker School of Law.

"We've seen situations where a student receives an offer, and the offer deadline follows our policy, but the offer is accompanied by a diversity scholarship, and the diversity scholarship expires before or during" OCI, Diamond said.

...

"Some people trace the boom in early recruiting to a 2019 decision by the NALP to scrap rules that limited firms from courting first-semester law students. The rules were replaced by nonbinding guidelines."

**********

And even more frenzied are the job offers that new bankers (in their first week(s) on the job) are getting from private equity firms:

Wall Street just kicked off an annual Hunger Games-style recruiting ritual for junior talent that has young bankers interviewing till 2 a.m. for jobs that don’t start until 2024. https://advance.lexis.com/api/document?collection=news&id=urn:contentItem:668V-4FD1-DXY7-W4MT-00000-00&context=1516831 

"As Insider reported on Tuesday, the frenzied process appears to have kicked off on Monday evening when recruiters for a handful of firms sent out blast emails to select junior bankers suggesting meetings ASAP — before the window of opportunity closes.

"The emails forced these young bankers — many of whom have just started their first Wall Street jobs at places like Goldman Sachs and Citi — to figure out ways to quietly leave their desks to interview for jobs that won't start until the fall of 2024. 

...

"In recent years, the PE recruiting process has moved earlier and earlier, from October to September, but never to late August, as it has done now. It's forcing firms to figure out how to interview candidates with no real job experience. "

NBER workshop on market design: Stanford November 4-5

 Here's an announcement that arrived by email:

To: NBER Market Design Working Group

From: Eric Budish, Jakub Kastl, and Marzena Rostek

 The National Bureau of Economic Research workshop on Market Design is a forum to discuss new academic research related to the design of market institutions, broadly defined. The next meeting will be held in Stanford, CA on November 4 & 5, 2022.

 We welcome new and interesting research and are happy to see papers from a variety of fields. Participants in the past meeting covered a range of topics and methodological approaches. Last year's program can be viewed at:

https://conference.nber.org/altsched/MDf21

 The conference does not publish proceedings or issue NBER working papers - most of the presented papers are presumed to be published later in journals.

 There is no requirement to be an NBER-affiliated researcher to participate.

Younger researchers, and researchers who are members of historically under-represented groups, are especially encouraged to submit papers.

 If you are interested in presenting a paper this year, please upload a PDF version by midnight EDT on August 1, 2022, to this link:

http://conference.nber.org/confsubmit/backend/cfp?id=MDf22

 Preference will be given to papers for which at least a preliminary draft is ready by the time of submission. Only authors of accepted papers will be contacted.

 For presenters in North America, the NBER will cover the travel and hotel costs. For speakers from outside North America, while the NBER will not be able to cover the airfare, it can provide support for hotel accommodation.

 There are a limited number of spaces available for graduate students to attend the conference, though we cannot cover their costs. Please email jkastl@princeton.edu a short nominating paragraph.

 Please forward this announcement to any potentially interested scholars. We look forward to hearing from you.

 

Market Design by Nikhil Agarwal & Eric Budish (forthcoming in the Handbook of Industrial Organization)

 Here's an NBER working paper that will appear in the Handbook of Industrial Organization:

Market Design by Nikhil Agarwal & Eric Budish

NBER WORKING PAPER 29367,  DOI 10.3386/w29367,  October 2021

Abstract: "This Handbook chapter seeks to introduce students and researchers of industrial organization (IO) to the field of market design. We emphasize two important points of connection between the IO and market design fields: a focus on market failures—both understanding sources of market failure and analyzing how to fix them—and an appreciation of institutional detail.

"Section II reviews theory, focusing on introducing the theory of matching and assignment mechanisms to a broad audience. It introduces a novel “taxonomy” of market design problems, covers the key mechanisms and their properties, and emphasizes several points of connection to traditional economic theory involving prices and competitive equilibrium.

"Section III reviews structural empirical methods that build on this theory. We describe how to estimate a workhorse random utility model under various data environments, ranging from data on reported preference data such as rank-order lists to data only on observed matches. These methods enable a quantification of trade-offs in designing markets and the effects of new market designs.

"Section IV discusses a wide variety of applications. We organize this discussion into three broad aims of market design research: (i) diagnosing market failures; (ii) evaluating and comparing various market designs; (iii) proposing new, improved designs. A point of emphasis is that theoretical and empirical analysis have been highly complementary in this research"

Here's the first paragraph:

"Textbook models envision markets as abstract institutions that clear supply and demand. Real markets have specific designs and market clearing rules. These features affect market participants and their allocations in various ways – they determine the actions an agent can take, the incentives for taking those actions, the information environment, the interactions between agents’ actions, and, ultimately, the final allocation. Well-designed markets have rules that coordinate and incentivize behavior in ways that lead to desirable outcomes. But it is not a given that all markets have good design. The Market Design field studies these  rules in order to understand their implications, to identify potential market failures, and to remedy them by designing better institutions."

NBER Market Design Working Group Meeting, Fall 2021

Market Design Working Group Meeting, Fall 2021

DATE October 21-23, 2021 (Times in EDT)

ORGANIZERS Michael Ostrovsky and Parag A. Pathak

NBER conferences are by invitation. All participants are expected to comply with the NBER's Conference Code of Conduct.

Thursday, October 21

12:00 pm

Randomized FIFO Mechanisms 

Francisco Castro, UCLA

Hongyao Ma, Columbia University

Hamid Nazerzadeh, University of Southern California

Chiwei Yan, University of Washington

12:45 pm

The Value of Excess Supply in Spatial Matching Markets 

Mohammad Akbarpour, Stanford University

Yeganeh Alimohammadi, Stanford University

Shengwu Li, Harvard University

Amin Saberi, Stanford University

1:30 pm

Break

2:00 pm

Choices and Outcomes in Assignment Mechanisms: The Allocation of Deceased Donor Kidneys 

Nikhil Agarwal, Massachusetts Institute of Technology and NBER

Charles Hodgson, Yale University

Paulo J. Somaini, Stanford University and NBER

2:45 pm

Price Discovery in Waiting Lists: A Connection to Stochastic Gradient Descent 

Itai Ashlagi, Stanford University

Jacob D. Leshno, University of Chicago

Amin Saberi, Stanford University

Pengyu Qian, Columbia Business School

3:30 pm

Adjourn

Friday, October 22

12:00 pm

Linear Pricing Mechanisms without Convexity 

Paul Milgrom, Stanford University

Mitchell L. Watt, Stanford University

12:45 pm

The Equilibrium Existence Duality: Equilibrium with Indivisibilities and Income Effects 

Elizabeth C. Baldwin, University of Oxford

Omer Edhan, University of Manchester

Ravi Jagadeesan, Stanford University

Paul D. Klemperer, University of Oxford

Alexander Teytelboym, University of Oxford

1:30 pm

Break

2:00 pm

Flow Trading 

Eric Budish, University of Chicago and NBER

Peter Cramton, University of Cologne

Albert "Pete" Kyle, University of Maryland

Jeongmin (Mina) Lee, Washington University in St. Louis

David Malec, University of Maryland

2:45 pm

Designing a Combinatorial Financial Options Market 

Xintong Wang, Harvard University

David Pennock, Microsoft Research

Nikhil Devanur, Amazon

David M. Rothschild, Microsoft Research

Biaoshuai Tao, Shanghai Jiao Tong University

Michael Wellman, University of Michigan

3:30 pm

Adjourn

Saturday, October 23

12:00 pm

Choice Screen Auctions 

Michael Ostrovsky, Stanford University and NBER

12:45 pm

Mechanism Design meets Priority Design: Redesigning the US Army's Branching Process 

Kyle Greenberg, United States Military Academy at West Point

Parag A. Pathak, Massachusetts Institute of Technology and NBER

Tayfun Sönmez, Boston College

1:30 pm

Break

2:00 pm

Decentralizing Centralized Matching Markets: Implications from Early Offers in University Admissions  

Julien Grenet, Paris School of Economics

Yinghua He, Rice University

Dorothea Kübler, WZB

2:45 pm

Mechanism and Priority Design for Distributional Objectives: An Application to Decrease Inequalities in Access to Experienced Teachers 

Julien Combe, CREST - Ecole polytechnique

Umut M. Dur, North Carolina State University

Olivier Tercieux, Paris School of Economics

Camille Terrier, University of Lausanne

M. Utku Ünver, Boston College

3:30 pm

Adjourn

The race to transact in high frequency trading by Aquilina, Budish, and O'Neill

 High frequency traders are constantly involved in races to trade on existing bids and asks or to cancel those bids and asks as they become stale.  Here's an NBER working paper that let's us look in on the action.

Quantifying the High-Frequency Trading "Arms Race"  by Matteo Aquilina, Eric Budish & Peter O'Neill  NBER WORKING PAPER 29011 DOI 10.3386/w29011  July 2021

Abstract: "We use stock exchange message data to quantify the negative aspect of high-frequency trading, known as “latency arbitrage.” The key difference between message data and widely-familiar limit order book data is that message data contain attempts to trade or cancel that fail. This allows the researcher to observe both winners and losers in a race, whereas in limit order book data you cannot see the losers, so you cannot directly see the races. We find that latency-arbitrage races are very frequent (about one per minute per symbol for FTSE 100 stocks), extremely fast (the modal race lasts 5-10 millionths of a second), and account for a remarkably large portion of overall trading volume (about 20%). Race participation is concentrated, with the top 6 firms accounting for over 80% of all race wins and losses. The average race is worth just a small amount (about half a price tick), but because of the large volumes the stakes add up. Our main estimates suggest that races constitute roughly one-third of price impact and the effective spread (key microstructure measures of the cost of liquidity), that latency arbitrage imposes a roughly 0.5 basis point tax on trading, that market designs that eliminate latency arbitrage would reduce the market's cost of liquidity by 17%, and that the total sums at stake are on the order of $5 billion per year in global equity markets alone."

From the introduction:

"At the center of the controversy over speed is a phenomenon called “latency arbitrage”, also known as “sniping” or “picking off” stale quotes. In plain English, a latency arbitrage is an arbitrage opportunity that is sufficiently mechanical and obvious that capturing it is primarily a contest in speed. For example, if the price of the S&P 500 futures contract changes by a large-enough amount in Chicago, there is a race around the world to pick off stale quotes in every asset highly correlated to the S&P 500 index: S&P 500 exchange traded funds, other US equity index futures and ETFs, global equity index futures and ETFs, etc. Many other examples arise from other sets of highly correlated assets: treasury bonds of slightly different durations, or in the cash market versus the futures market; options and the underlying stock; ETFs and their largest component stocks; currency triangles; commodities at different delivery dates; etc. Perhaps the simplest example is if the exact same asset trades in many different venues. For example, in the US stock market, there are 16 different exchanges and 50+ alternative trading venues, all trading the same stocks—so if the price of a stock changes by enough on one venue, there is a race to pick off stale quotes on all the others. These races around the world involve microwave links between market centers, trans-oceanic fiber-optic cables, putting trading algorithms onto hardware as opposed to software, co-location rights and proprietary data feeds from exchanges, real estate adjacent to and even on the rooftops of exchanges, and, perhaps most importantly, high-quality human capital. Just a decade ago, the speed race was commonly measured in milliseconds (thousandths of a second); it is now measured in microseconds (millionths) and even nanoseconds (billionths)."

Congestion in vaccine delivery, and shortage of overall supply: latest news, and a call for increased production

Covid vaccines in many parts of the U.S. are being distributed only slowly, while other places are experiencing shortages.

 The NY Times brings us up to date:

New Pandemic Plight: Hospitals Are Running Out of Vaccines.  Health officials are frustrated that available doses are going unused while the virus is killing thousands of people each day. Many vaccine appointments have been canceled.   By Simon Romero and Giulia McDonnell Nieto del Rio

"In the midst of one of the deadliest phases of the pandemic in the United States, health officials in Texas and around the country are growing desperate, unable to get clear answers as to why the long-anticipated vaccines are suddenly in short supply. Inoculation sites are canceling thousands of appointments in one state after another as the nation’s vaccines roll out through a bewildering patchwork of distribution networks, with local officials uncertain about what supplies they will have in hand.

...

"Health officials trying to piece together why this is happening are puzzled by reports that millions of available doses are going unused. As of Friday morning, nearly 39.9 million doses of the Pfizer-BioNTech and Moderna vaccines had been distributed to state and local governments, but only about 19.1 million doses had been administered to patients, according to the Centers for Disease Control and Prevention....

...

"“Right now, in many cities and counties when an announcement of available vaccinations is made, website sign-up pages crash and phone calls go unanswered"

...

"The public health department in San Francisco and hospitals in the city were “caught by surprise” by the lack of doses, Dr. Rutherford said, and by the eligibility expansion to those 65 and older, which likely strained the system. Varying vaccine distribution channels — such as Kaiser Permanente and the University of California, San Francisco — receive the doses on their own, he said, further complicating an already convoluted distribution system.

“So it’s a little hard for the city to understand exactly what’s left over, what they need to do, where the holes are to fill,” Dr. Rutherford said. Still, new vaccination sites are opening in San Francisco, which Dr. Rutherford said would help speed the process along once more doses become available. “There’s this tension between efficiency and equity,” he said. “It’s never easy.”

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

Here's a paper that points out that getting people vaccinated fast would have enormous benefits in terms of saving lives and reopening the economy, and that once we get the kinks out of vaccine distribution, it makes sense to invest in production facilities much faster than the pharma companies might feel it was necessary to do on their own.

Preparing for a Pandemic: Accelerating Vaccine Availability  By AMRITA AHUJA, SUSAN ATHEY, ARTHUR BAKER, ERIC BUDISH, JUAN CAMILO CASTILLO, RACHEL GLENNERSTER, SCOTT DUKE KOMINERS, MICHAEL KREMER, JEAN LEE, CANICE PRENDERGAST, CHRISTOPHER M. SNYDER, ALEX TABARROK, BRANDON JOEL TAN, WITOLD WIECEK

Abstract: Vaccinating the world’s population quickly in a pandemic has enormous health and economic benefits. We analyze the problem faced by governments in determining the scale and structure of procurement for vaccines. We analyze alternative approaches to procurement, arguing that buyers should directly fund manufacturing capacity and shoulder most of the risk of failure, while maintaining some direct incentives for speed. We analyzed the optimal portfolio of vaccine investments for countries with different characteristics as well as the implications for international cooperation. Our analysis, considered in light of the experience of 2020, suggests lessons for future pandemics.

Fuhito Kojima wins the 2021 Japanese Economic Association Nakahara Prize

 Congratulations to Fuhito Kojima, who is the 2021 winner of the Nakahara Prize of the Japanese Economic Association, which is awarded each year to an exceptional economist under the age of 45.

You can find the announcement (in Japanese) here. Google translate works well, and you can see the list of previous winners.

Here's part of the English announcement (which I can't find on the web...)

"The 2021 Japanese Economic Association Nakahara Prize

Professor Fuhito Kojima

"The Nakahara prize was established in 1995 and is funded by a donation from Mr. Nobuyuki Nakahara. The aim of the prize is to honor and encourage young researchers under the age of 45 to publish internationally recognized research. 

It is a great pleasure to announce that the 2021 Nakahara prize has been awarded to Professor Fuhito Kojima. Born in 1979, Professor Kojima received BA in economics from the University of Tokyo, and earned Ph.D. in economics from Harvard University in 2008. He was Assistant, Associate and then Full Professor of Economics at Stanford University, and he is Professor of Economics at the University of Tokyo from September 2020.

Professor Kojima’s research is focused on matching theory and market design. He has made a number of important contributions to the field. Many of his researches are motivated by various kinds of constraints imposed on matching problems in real life. His research significantly contributes to widening applicability of the theory to real matching markets.

...

"Selected Publications

1. “Job Matching under Constraints” (2020), joint with Ning Sun and Ning Neil Yu,  conditionally accepted, American Economic Review.

2. “Stable Matching in Large Economies” (2019), with Yeon-Koo Che and Jinwoo Kim, Econometrica, 87-1, pp65-110.

3. “Efficient Matching Under Distributional Constraints: Theory and Applications” (2015), with Yuichiro Kamada, American Economic Review, 105, pp 67-99.

4. “Matching with Couples: Stability and Incentives in Large Matching Markets” (2013), with Parag A. Pathak and Alvin E. Roth, Quarterly Journal of Economics 128, pp 1585-1632.

5. “Designing Random Allocation Mechanisms: Theory and Applications” (2013), with Eric Budish, Yeon-Koo Che, and Paul Milgrom, American Economic Review 103, pp 585-623.

6. “Asymptotic Equivalence of Probabilistic Serial and Random Priority Mechanisms” (2010), with Yeon-Koo Che, Econometrica 78, pp 1625-1672.

7. “Axioms for Deferred Acceptance” (2010), with Mihai Manea, Econometrica 78, pp 633-653.

8. “Incentives and Stability in Large Two-Sided Matching Markets” (2009), with Parag A. Pathak, American Economic Review 99, pp 608-27.

SELECTION COMMITTEE

Kosuke Aoki (Chair) (University of Tokyo), Anton Braun (Federal Reserve Bank of Atlanta), Federico Echenique (California Institute of Technology), Yuichi Kitamura (Yale University), Fumio Ohtake (Osaka University), Tadashi Sekiguchi (Kyoto University), Mototsugu Shintani (University of Tokyo)

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

By a strange coincidence,  in 2013 I was the recipient of a non-academic award signed by Mr. Nobuyuki Nakahara, whose interests extend beyond economics.

Cognomos--course allocation software by Eric Budish et al.

Cognomos is a site that will put school administrators in touch with the designers of  Wharton's Course Match, which I've blogged about here and here with links to the underlying academic papers.

You can hear Eric Budish talk about it in the videos below.

Market designs to reduce the costs of high frequency trading, by Baldauf and Mollner

A forthcoming paper by Markus Baldauf and Joshua Mollner considers two designs to reduce the costs of (and incentives for) very high frequency trading. One is frequent batch auctions (on also which see Budish et al.), and the other is allowing market  participants to cancel bids or asks while imposing a delay on acceptances of those bids or asks, so that spreads will not have to be widened to defend against faster traders.

High-Frequency Trading and Market Performance
Journal of Finance, Forthcoming
Last revised: 25 Jan 2020
Markus Baldauf
University of British Columbia (UBC) - Division of Finance
and
Joshua Mollner
Northwestern University - Kellogg School of Management



Abstract
We study the consequences of high-frequency trading (HFT) — and potential policy responses — via the tradeoff between liquidity and information production. Faster speeds facilitate HFT with consequences for this tradeoff: information production diminishes because informed traders have less time to trade before HFTs react, but liquidity (measured by the bid-ask spread) improves because informational asymmetries decline. HFT also pushes outcomes inside the frontier of this tradeoff. However, outcomes can be restored to the frontier by replacing the limit order book (LOB) with either of two alternative mechanisms: delaying all orders except cancellations or frequent batch auctions.

What is the cost of high frequency trading? by Aquilina, Budish, and O'Neill

A recent WSJ article highlights a paper by Aquilina, Budish, and O'Neill:

Ultrafast Trading Costs Stock Investors Nearly $5 Billion a Year, Study Says
U.K. regulator’s study says ‘latency arbitrage’ imposes a small but significant tax on investors
"High-frequency traders earn nearly $5 billion on global stock markets a year by taking advantage of slightly out-of-date prices, imposing a small but significant tax on investors, a new study says."
********

And here's the original paper from Britain's Financial Conduct Authority:

Quantifying the High-Frequency Trading 'Arms Race': A new methodology and estimates
Occasional papers 27/01/2020
by Matteo Aquilina, Financial Conduct Authority,
Eric Budish, University of Chicago Booth School of Business and NBER and Peter O’Neill, Financial Conduct Authority


"The authors use stock exchange message data to quantify the negative aspect of high-frequency trading, known as 'latency arbitrage.' The key difference between message data and widely-familiar limit order book data is that message data contain attempts to trade or cancel that fail."

 Summary:
"The authors use stock exchange message data to quantify the negative aspect of high-frequency trading, known as “latency arbitrage.” The main results show:

• races are frequent, fast and worth only small amounts per race
• a large proportion of daily trading volume is in races
• race participation is concentrated
• in aggregate, these small races make up a meaningful proportion of price impact
• in aggregate, these small races add up to meaningful harm to liquidity
• in aggregate, these small races add up to a meaningful total ‘size of the prize’
• The paper finds that while there is only a small detriment per transaction as a result, it adds up to a 17% reduction in the cost of liquidity and $5bn a year in tax on trading volume."

Market Design at 25, May 14-15 in Washington DC

The NBER is holding a conference in May, in Washington.

"The conference, which has been organized by Irene Lo, Michael Ostrovsky, and Parag Pathak, is timed to roughly commemorate the 25th anniversary of the first FCC spectrum auction, in 1994, the redesign of the National Resident Match Program (begun in 1995, completed in 1998), and the launch of the sulphur dioxide allowance-trading program under Title IV of the Clean Air Act Amendments (amended in 1990, initiated in 1995).  The conference goal is to assess the key contributions of market design in a number of specific fields and policy areas, and to identify key open questions that are priorities for future research."

Market Design @ 25

Authors Please upload your paper and slides here.

Irene Y. Lo, Michael Ostrovsky, and Parag A. Pathak, Organizers

May 14-15, 2020

JW Marriott Hotel, 1331 Pennsylvania Avenue, Washington, DC

Conference Code of Conduct

Thursday, May 14
8:00 am	Continental Breakfast
8:30 am	Spectrum Auctions
	- Opening speaker: Jessica Rosenworcel, FCC Commissioner
	- Overview: Paul Milgrom, Stanford University
	- Viewpoint: Evan Kwerel, FCC
9:55 am	Break
10:10 am	Matching and Broadening the Definition of Markets
	- Overview: Alvin Roth, Stanford University and NBER
	- Viewpoint 1: Edward Glaeser, Harvard University and NBER
	- Viewpoint 2: Susan Athey, Stanford University and NBER
11:20 am	Break
11:35 am	Market Design for the Environment
	- Overview: Michael Greenstone, University of Chicago and NBER
	- Viewpoint 1: Richard Schmalensee, Massachusetts Institute of Technology and NBER
	- Viewpoint 2: Nathan Keohane, Environmental Defense Fund
12:45 pm	Lunch
2:15 pm	Market Design in Healthcare
	- Overview: Amy Finkelstein, Massachusetts Institute of Technology and NBER
	- Viewpoint 1: Marc Miller, LJAF / Former MedPac
	- Viewpoint 2: Kate Ho, Princeton University and NBER
3:25 pm	Market Design in Transportation
	- Overview: Michael Ostrovsky, Stanford University and NBER
	- Viewpoint 1: David Shmoys, Cornell University
	- Viewpoint 2: TBA
4:35 pm	Break
4:50 pm	Market Design in Developing Countries
	- Overview: Kevin Lleyton-Brown, University of British Columbia
	- Viewpoint 1: Tavneet Suri, Massachusetts Institute of Technology and NBER
	- Viewpoint 2: Jishnu Das, Georgetown University
6:00 pm	Adjourn
6:30 pm	Conference Dinner
Friday, May 15
7:45 am	Continental Breakfast
8:15 am	Market Design for Education
	- Overview: Parag Pathak, Massachusetts Institute of Technology and NBER
	- Viewpoint 1: Derek Neal, University of Chicago and NBER
	- Viewpoint 2: Neerav Kingsland, City Fund
9:25 am	Break
9:40 am	Market Design for Organ Transplantation
	- Overview: Tayfun Sonmez, Boston College
	- Viewpoint 1: Nikhil Agarwal, Massachusetts Institute of Technology and NBER
	- Viewpoint 2: Jennifer Erickson, formerly White House OSTP
10:50 am	Break
11:05 am	Market Design for Public Housing
	- Overview: Nathan Hendren, Harvard University and NBER
	- Viewpoint 1: Winnie van Dijk, University of Chicago and NBER
	- Viewpoint 2: Marge Turner, Urban Institute
12:15 pm	Lunch
1:15 pm	Electricity Market Design
	- Overview: Mar Reguant, Northwestern University and NBER
	- Viewpoint 1: Bob Wilson, Stanford University
	- Viewpoint 2: Shmuel Oren, University of California at Berkeley
2:25 pm	Market Design in Online Markets
	- Overview: Preston McAfee, formerly Caltech and Microsoft
	- Viewpoint 1: Hal Varian, Google
	- Viewpoint 2: Irene Lo, Stanford University
3:35 pm	Break
3:50 pm	Market Design in Financial Markets
	- Overview: Darrell Duffie, Stanford University and NBER
	- Viewpoint 1: Eric Budish, University of Chicago and NBER
	- Viewpoint 2: Gary Gensler, Massachusetts Institute of Technology
5:00 pm	Adjourn