Heathrow airport

Heathrow airport is in the process of expanding by adding an additional runway, a process that has run into lots of opposition, the Times reports: Heathrow gets third runway in £9bn deal . The Times further reports that Greenpeace is planning a delaying action: Greenpeace buys Heathrow land earmarked for airport's third runway.

The purchase of land in the way of the runway is only a delaying action, because the government plans to require the sale of the land, by eminent domain. But Greenpeace is hoping that the legal process is congested, and can be made to run very slowly, which might delay the process long enough that it could be revisited after the next election:

"The group also plans to divide the field into thousands of tiny plots, each with a separate owner. BAA, the airport’s owner, would be forced to negotiate with each owner, lengthening the compulsory purchase process. "

Marriage market in Saudi Arabia: age of marriage

Many markets unravel, that is, transactions tend to become earlier and earlier. One example is marriage markets, in which betrothals can sometimes be very early indeed, particularly in polygenous cultures. The NY Times reports that Saudi Arabia's most senior cleric was quoted Wednesday as saying it is permissible for 10-year-old girls to marry .

"Al Sheikh's comments come at a time when Saudi human rights groups have been pushing the government to put an end to marriages involving the very young and to define a minimum age for marriage. ...
"On Sunday, the government-run Human Rights Commission condemned marriages of minor girls, saying such marriages are an ''inhumane violation'' and rob children of their rights.
The commission's statement followed a ruling by a court in Oneiza in central Saudi Arabia last month that dismissed a divorce petition by the mother of an eight-year-old girl whose father married her off to a man in his 50s....
"Activists say the girls are given away in return for hefty dowries or as a result of long-standing custom in which a father promises his infant daughters and sons to cousins out of a belief that marriage will protect them from illicit relationships."

Rental market for textbooks

From Peter Klein at Organizations and Markets: Students: Consider Renting, not Buying, Your Books

"Chegg is the Netflix of college textbooks. Get your book in the mail, along with a prepaid return address label, don’t write in it too much, and send it back once the semester is over. I took a quick look and the savings appear to be substantial for brand-new books, modest otherwise (because there are robust secondary markets for used textbooks). The newest edition of a book I assigned last semester is $127 new from Amazon, $72 for a one-semester rental from Chegg."

HT Steve Leider

Class notes on Market Design

Fuhito Kojima is teaching a Matching and Market Design class at Yale, and he'll post his lectures as they develop.

On my game theory and market design web page I have a list of such classes (below): if I've missed yours, please let me know.

Class notes and materials:
Susan Athey teaches an undergrad class on market design at Harvard: here is her syllabus.
Peter Bossaerts has a course called Designing Market-Based Solutions to Allocation and Communication Problems at Ecole Polytechnique Federale de Lausanne.
Peter Cramton teaches a market design class at Maryland.
Francoise Forges coordinates a program on Du calcul economique a l' economic design at Universite Paris-Dauphine
Fuhito Kojima is teaching a Matching and Market Design class at Yale.
Kate Larson has a course on Electronic Market Design at Waterloo.
Noam Nisan teaches a class called Foundations of Electronic Commerce.
David Parkes has a class on Computational Mechanism Design
Tuomas Sandholm teaches Foundations of Electronic Marketplaces at CMU
Leigh Tesfatsion maintains pages on Electricity restructuring and market design.
Bob Wilson has posted some of his class materials from his market design class at Stanford.
(And here's another link to my market design class at Harvard.)

Thomas Kittsteiner and Axel Ockenfels have a review paper: Market Design: A Selective Review. Zeitschrift für Betriebswirtschaft, Special Issue 5 (2006), 121-143.

Black market for kidneys--in the US?

Some years ago, when I gave a talk on kidney exchange at the Barcelona Clinic, a nephrologist there told me there were hospitals in the US at which I might be able to buy a kidney. Now a story in Newsweek suggests that, perhaps without the hospitals taking an active part, there may be more buying and selling in the U.S. than is easily seen: Not Just Urban Legend.

HT Steve Leider

House swaps

Tight real estate markets make it especially difficult to complete transactions in which each party needs to sell his own house before he can buy another. Michael Ostrovsky points me to a variety of house-swap plans that resemble kidney exchange in various ways, including combinations of two-way exchanges, and larger exchanges and chains.

Here's a Times of London report: If you can’t sell your home, then swap it

Here's a WSJ report: I'll Buy Your HouseIf You Buy Mine

"Both sides of a swap transaction typically close simultaneously -- taking away the risk of being saddled with two mortgages at once, or of having to borrow more after purchasing a new home because your old house didn't sell for as much as you thought it would. When swap partners meet directly online they also save on brokers' sales commissions -- usually 4% to 7% in most markets. If there are homes of unequal value, one buyer provides the cash or gets a mortgage to make up the difference experts say.
Mr. Sawtelle found his swap via a $19.95 listing on OnlineHouseTrading.com, one of at least six swap sites started in the past year. Four have started in just the past seven months, including OnlineHouseTrading.com, GoSwap.org, DaytonaHomeTrader.com and DomuSwap.com. Together the six sites have roughly 16,000 postings. At Craigslist.org, the popular ad site, the number of "home swap" listings -- which includes people trading homes temporarily for vacation -- jumped 56%, to 7,392 in the 12 months ending in December, the company says, and much of the growth came from people trying to permanently sell each other their homes."

Note that even some of the simple game theory that leads to simultaneous kidney exchanges also leads to simultaneous house exchanges, despite the fact that it's perfectly legal to write contracts about the sale of houses.

Market for Allies

A new NBER paper looks at the question.

Can Hearts and Minds Be Bought? The Economics of Counterinsurgency in Iraq by Eli Berman, Jacob N. Shapiro, Joseph H. Felter
Abstract:

Rebuilding social and economic order in conflict and post-conflict areas will be critical for the United States and allied governments for the foreseeable future. Little empirical research has evaluated where, when, and how improving material conditions in conflict zones enhances social and economic order. We address this lacuna, developing and testing a theory of insurgency. Following the informal literature and US military doctrine, we model insurgency as a three-way contest between rebels seeking political change through violence, a government seeking to minimize violence through some combination of service provision and hard counterinsurgency, and civilians deciding whether to share information about insurgents with government forces. We test the model using new data from the Iraq war. We combine a geo-spatial indicator of violence against Coalition and Iraqi forces (SIGACTs), reconstruction spending, and community characteristics including measures of social cohesion, sectarian status, socio-economic grievances, and natural resource endowments. Our results support the theory's predictions:
counterinsurgents are most generous with government services in locations where they expect violence; improved service provision has reduced insurgent violence since the summer of 2007; and the violence-reducing effect of service provision varies predictably across communities.

http://papers.nber.org/papers/W14606

School choice: cost of strategy-proofness

A new NBER paper takes another look at the (old) Boston mechanism.


Ex Ante Efficiency in School Choice Mechanisms: An Experimental Investigation by Clayton Featherstone, Muriel Niederle - #14618 (ED LS)

Abstract: Criteria for evaluating school choice mechanisms are first, whether truth-telling is sometimes punished and second, how efficient the match is. With common knowledge preferences, Deferred Acceptance
(DA) dominates the Boston mechanism by the first criterion and is ambiguously ranked by the second. Our laboratory experiments confirm this. A new ex ante perspective, where preferences are private information, introduces new efficiency costs borne by strategy-proof mechanisms, like DA. In a symmetric environment, truth-telling can be an equilibrium under Boston, and Boston can first-order stochastically dominate DA in terms of efficiency, both in theory and in the laboratory.
http://papers.nber.org/papers/W14618

School choice at sea

"Peer effects" are a potentially big issue in schools, although hard to model. How children affect each others' education can be hard to understand and measure. (What kinds of children do you want your children to go to school with, and what difference does it make?)

For bluefish, in contrast, there is a clear case for assortative matching: "Bluefish are cannibalistic. For this reason, bluefish tend to swim in schools of similarly-sized specimens."

(a market designer joke:)

Market for Humanities Ph.D.'s (and economists)

An email from the American Academy of Arts and Sciences announces some preliminary data from a new project: Humanities Resource Center Online . The section on the Career Paths of Humanities Ph.D.’s has some interesting graphs, like this one, which shows (not surprisingly) that new Humanities Ph.D.'s are much more likely to go directly into academic employment (and much less likely to go into "other employment" or postdocs) than Ph.D.'s in the sciences (broken out by physical sciences, life sciences, social sciences, and engineering).

In a difficult job market like the one this year, economists should feel (relatively) fortunate in the variety of careers open to new Ph.D.'s. The non-academic market for economists also contributes to keeping academic salaries relatively high: The Center for Business and Economic Research at the Sam Walton School of Business of the University of Arkansas posts the results of their annual survey of economics departments, for the academic years 1999-2000 through 2009-2010, including some salary information. Here is the latest one, with prospective information about 2009-10, published January 4.

College football and the BCS National Championship Game

Number 1 ranked Oklahoma will play number 2 ranked Florida Thursday evening in the Bowl Championship Series' National Championship Game, which this year will be played at the Orange Bowl. The championship game is the culmination of a sequence of "bowl" games that the BCS organizes, in which the most successful college teams each season play a final post-season game.

College football doesn't host playoffs. The "championship" game matches the two highest ranked teams at the end of the regular season, based on a more than usually uncertain ranking system (since some of the highly ranked teams will not have played each other). Sports Illustrated just published a story, before the championship game, saying that some of the early bowl games had low Nielsen ratings (which measure television viewership): Ratings are proof the addition of fifth BCS game officially a failure. The article notes
"By removing the top two teams from the existing BCS bowls (Rose, Fiesta, Sugar and Orange), the remaining lineup gets unavoidably watered-down. "

Utku Unver and Guillaume Frechette and I wrote a paper which showed that (under earlier versions of the BCS system) the championship games drew enough extra television viewers to make up for the lower viewership in other bowl games that (consequently) had neither the top nor second ranked team playing in them. (See also this interview about the origin of the BCS system (to which I devoted an earlier post).)

So, while the most exciting thing for some people Thursday evening will be the final score, I'll be waiting to hear the final Nielsen ratings.


(Our European colleagues are always bemused by the large role that college plays in the life of American football players, not to mention the role that football plays in the life of American colleges. While some professional sports have minor leagues or the equivalent, colleges serve that role for football. But that's a story for another time.)

10 PM update: here's a Washington Post story on the more than usual uncertainty in this year's rankings, which may lead to a lack of consensus that the winner of the championship game is the best college team. (The president elect for one is on record as thinking that a playoff system would be more rewarding...)

Exam schools

One way to control admission to (some) public schools is by having an entrance exam. That solves a number of problems, including of course the time at which admissions choices are made. In response, families sometimes invest a lot of time in exam preparation. One development that has apparently moved from Asia to NYC is the "cram school". The NY Times reports on The Big Cram for Hunter High School. The story looks in on a group of sixth graders who "had paid up to $3,000 for a few months of English and math classes at Elite, a regimen modeled on the cram schools of South Korea, China and Japan."
"While Elite limits advertising to Asian-language newspapers, about 50 percent of its students are non-Asian. ...Many of the students in the winter break program were children of immigrants — from South Korea, Japan, Poland — and most attend city schools. "

"When prompted, they took a moment to reflect on why they wanted to get into Hunter. Some said it was an urge to become better students and be surrounded by bright peers; others said they had been told Hunter was a vital steppingstone to elite colleges and a successful career... "

"And what if they were not among the fewer than 200 students who gain seats out of a pool of up to 2,000 test-takers?
“I’ll be sad,” said James Lee, a student at Intermediate School 119 in Glendale, Queens, “but there’s still Stuyvesant.”"

Markets for Macro Risks: Early Shiller

Whenever I think about designing markets on which individuals can hedge big risks, I think about the remarkable market-design work of Robert Shiller. It's not his recent bestsellers that I'm thinking of as much as his 1993 Clarendon Lectures, Macro Markets: Creating Institutions for Managing Society's Largest Economic Risks. It called for the creation, among other things, of what became the Case-Shiller Home Price Indices, that allow large movements in residential real estate to be hedged.

His web pages on what he calls Financial Democracy, and its associated references and links, are well worth looking at.

A word for unraveling in Singapore: "Choping"

"Choping" is Singapore English slang for reserving something well in advance, i.e. a place in school for your child, etc. That is, it is one of the actions involved in the unraveling of markets, the process by which transactions are arranged increasingly far in advance of when they will be carried out. Sometimes this has been a cause of market failures that lead to new market designs, with a prominent example being medical labor markets.

In some cases, the unraveling of a market has caused serious inefficiencies, as when college football bowl games used to be decided before the end of the regular season (which made it harder to arrange the kind of championship games that draw high television viewership), or when gastroenterologists used to be hired long before they finished their internal medicine residencies (which caused the national market to collapse into lots of regional markets). But, in most unraveled markets, data are lacking to directly determine if a particular set of market arrangments and timing are inefficient.

Tyler Cowen at MR has a (characteristically) very interesting post on choping at Singapore food courts, where patrons reserve seats by placing tissue papers on them, and then go to stand in line to get their food. He suggests (maybe just to be contrarian) that this is efficient. As one of the comments to his post points out, this would be the case in a model in which having to look for a seat once you have your food is incomparably more costly than any other outcome. Of course it is easy to see how (with different parameters) reserving seats in advance could be inefficient (although still an equilibrium). E.g. if it takes 15 minutes to get your food, and 15 minutes to eat it, then each chair could serve four people in an hour if people looked for a chair after getting their food, but only two people per hour if people reserve a chair before getting on line.

The discussion of all this in the Singapore press is satisfyingly nuanced. After a demonstration against choping by some students (Wiping out bad habit of 'choping' seats with tissue pack), the Straits Times has a story (Is this rude?) that explains both points of view.

On the one hand:
"But many people reckon there is nothing rude about reserving one's spot with a packet of tissue paper. Indeed, Mr Wong, who arrived in Singapore last month, said: 'It is a practical and creative way to reserve seats instead of standing around with a tray of food turning cold.' "

On the other:
"Tissue 'choping' seems to be uniquely Singaporean. Housewife Ivy Ong-Wood, in her late 30s, a Malaysian now living in Hong Kong, told LifeStyle: 'At the tea cafes or cha chan tengs in Hong Kong, people queue outside and are told where to sit. In Malaysia, there is no problem getting seats at the food centres.' "

Whatever the truth of the matter, this will not be an easy equilibrium to displace. The story notes: "It is so pervasive that companies even have tissue packs specially made with the word 'chope' for marketing purposes. "

International market for transplantable organs: "transplant tourism"

Frank Delmonico writes in response to my previous post as follows:

"Re: the Times of London story

"It is well-known that patients from Greece and Israel and the Gulf countries travel to destinations that provide priority organ transplants for those recipients.

"This practice has become termed “ transplant tourism” and the ethical objection arises from two important aspects:

"1. Rich patients with ample resources are prioritized for example in the UK (as evident by this Times of London story) to undergo transplantation which diverts resources and expertise from the native patients living in that destination country;
2. The impetus to develop or expand deceased donation in the client country is diminished. Why develop a program of deceased organ transplantation, if residents of the client country can readily buy an organ in the destination country?

"Transplant tourism ( and organ trafficking) has been condemned by the Istanbul Declaration.

"The Transplantation Society is working diligently country by country to expose these practices and bring them to a halt. Alternatively, each country should develop a national self-sufficiency in organ donation and transplantation to provide a sufficient number of organs for their own native patients. "

Francis L. Delmonico, M.D.
Director of Medical Affairs
The Transplantation Society

World Health Organization
Advisory for Human Transplantation

Professor of Surgery
Harvard Medical School

Market for transplantable organs

The Times of London reports on Outrage over organs ‘sold to foreigners’

Much of the discussion of sales of transplantable organs focuses on whether the organ donors may receive compensation. Most countries forbid such sales as repugnant. The issue here is quite different. Britain has both private medicine and a National Health Service, and in transplants performed privately, the transplantable organ is essentially sold in a package with the surgery and hospitalization. That is, even without any payments to donors, hospitals and surgeons sell organs, and when the transplant recipients are not British nationals, questions are being raised, the paper reports:

"THE organs of 50 British National Health Service donors have been given to foreign patients who have paid about £75,000 each for private transplant operations in the past two years, freedom of information documents show.
The liver transplants took place at NHS hospitals, despite severe shortages that mean many British patients die while waiting for an organ that could save their lives.
The documents disclose that 40 patients from Greece and Cyprus received liver transplants in the UK paid for by their governments. Donated livers were also given to people from non-European Union countries including Libya, the United Arab Emirates, China and Israel.
The surgeons who carry out the transplants receive a share of the operation fee — believed to be about £20,000 — as all the work is done privately in NHS hospitals. "


See my recent posts on the ongoing discussion in the U.S. on compensation for donors here and here. In the U.S. too, of course, although no payments to donors or their survivors are permitted, patients receive organs as part of a package that they or their insurers are charged for.

The credit crisis and market design

The WSJ, in its Real Time Economics Blog and in a related story in their January 2 issue, raises some questions about how discussion of financial market regulation has turned into a discussion of market design (although that's not exactly the way they put it). They recount the poor reception given to Raghuram G. Rajan's 2005 presentation at the Fed's Jackson Hole conference in honor of Alan Greenspan. Prof. Rajan noted that banks' increased exposure to the securities markets would make them less able to serve as a source of credit in a crisis, and his concerns were, the story reports, met with disdain by those assembled. The blog summarizes the attitude at the time:

"The episode suggests one reason that the crisis went unchecked: A dangerous all-or-nothing orthodoxy had come to dominate the policy debate, where one was either for free markets or against them. "

The point of the market design movement, of course, is that markets aren't either "free" or non-existent. A better description is that markets have rules, and some rules work better than others, and the goal of regulators and others who shape the rules should be to find rules that enable markets to work better.

However the WSJ blog also quotes Professor Rajan on the difficulties facing academics who wish to offer opinions on compex issues of public policy:
"“Most academics are really reluctant to take part in the public dialog, because the public dialog requires you to have an opinion about things you can’t really be sure about,” says Mr. Rajan. “They fear talking about things where everything is not neatly nailed in a model. They stay away and let the charlatans occupy the high ground.” "


(The story notes that calls for sensible regulation and market design were met with condescension before the credit crisis, a condescension that is being reevaluated now. So perhaps now is the chance I've been waiting for to note that an anagram for MARKET DESIGN is NEGATED SMIRK :-)

Designer dresses: avoiding coordination failure

The Telegraph reports that "The anguish and embarrassment of arriving at an exclusive party only to find another woman wearing the same outfit could be banished forever thanks to a new website that allows partygoers to “register” their dresses before the event."

Apparently this is a serious problem, as the paper reports "The dress duplication problem has long caused anxiety among women. "

Here is the website at which you can register your dress and the event you intend to wear it to, or see if someone else has: http://dressregistry.com/ .

I'm planning to wear jeans to the office today, guys.

Marriage market for non-resident Indians

Being an overseas businessman is no longer the draw it once was in India's market for arranged marriages: West no longer best for Indian brides seeking suitors. Interestingly, detective agencies seem to play a role in this market.

"Those who work in India’s arranged marriage business say that Mrs Verma is far from alone. “Interest in NRIs has fallen by a quarter in just the past few months,” said Vivek Khare, of Jeevan-saathi.com, a website that helps to arrange up to 6,000 weddings a month.
Last year, an NRI with a decent career in Britain could easily arrange to meet 15 possible brides during one trip to India, according to Mr Khare. Now he would struggle to see five.
The demise of the NRIs’ status owes much to India’s economic renaissance and a new sense of national pride, experts say. “The opportunities to do well in India have increased hugely,” said Vibhas Mehta, of Shaadi.com, another matrimonial website. He added that India’s present brides-to-be are more independent than their predecessors and less taken with the idea of travelling overseas, leaving their own careers and families behind. ...

"It is not only the NRIs who stand to miss out. In India, scores of private detective agencies do little else but check up on prospective brides, to ensure Indians overseas have received accurate pictures. "

The Economist as Auctioneer

Paul Milgrom has a new company, Auctionomics.
Arguably already the world's leading auction theorist, and a demigod among bidding consultants, this marks Paul's entry into the world of auctioneers (and providers of auction software), with some new ideas for flexible auction formats.

An older, related venture is Market Design Inc., with a number of other colleagues active as auctioneers, including Peter Cramton and Lawrence Ausubel, and the company Power Auctions LLC.

The title of this post is a play on the title of my 2002 article "The Economist as Engineer:... ." The increasing involvement of economists as auctioneers (and not just auction theorists and consultants and advisors) is a sign that market design is thriving.