Last minute tickets at sold out Fenway

The Red Sox, whose home games are always sold out, reserve some tickets for last minute purchase: At Sold-Out Fenway, a Way in for Patient Fans .
"For every home contest, whether a weekday game in April or a Game 7 in October, the Red Sox set aside some tickets for fans who did not plan ahead. There may be a few dozen seats available, there may be a few hundred. The point is, they are available, every game, for those who waited too long but are willing to wait a bit longer.
Starting five hours before the scheduled first pitch, fans can line up on the sidewalk near Gate E, around the corner from hectic Yawkey Way. There is a red-and-white sign reading “Game Day Ticket Sales,” and there are a pair of green roll-up doors. Two hours before the game, the doors are raised and tickets are sold at face value. "
...
"“To us, it’s part of a long-term strategy,” said Ron Bumgarner, the team’s vice president for ticketing. “We do not want every fan at Fenway Park to be a season-ticket holder with 81 games. We want as many different people in Red Sox Nation as possible to be able to come to the games.”
Such a system comes with strict rules, and several copies of them are pasted near Gate E. First, five hours is deemed the perfect amount of wait time — too short to spend the night (which used to be allowed, but created the predictable unruliness) but long enough to make it a bit of a chore.
Second, fans must stay in line and cannot save spaces for other fans. In other words, no sitting across the street at the Cask ’n Flagon, or under the center-field stands at the Bleacher Bar, draining beverages while a buddy reserves a spot until the last minute.
Third, once the tickets are purchased — only one per person — fans must enter the ballpark. That means no scalping the ticket to the highest bidder, a temptation for big games."

Sentenced to prison? Hire a consultant.

The NY Times reports (in the Sports section) that
Consultants Are Providing High-Profile Inmates a Game Plan for Coping

"The former Giants wide receiver Plaxico Burress, who is serving a two-year sentence for a weapons charge, recently joined a growing list of high-profile inmates who have hired prison consultants to help them navigate their entry to a confined life. Others have included Bernard L. Madoff, Michael Vick, Mike Tyson, Martha Stewart and Leona Helmsley."

Book publishers, and book citations

It is customary when citing a book in the bibliography of a scholarly article to include the publisher, and the name of a city associated with that publisher. This seems to be a holdover from the days when publishers were relatively small, and perhaps when the British and American versions of a book with the same publisher might have some differences. And maybe knowing the city would help you find the book.

But book publishing has changed, and when I look at the front material of a scholarly book today, as often as not I see something like
"Morgan Kaufmann Publishers, An Imprint of Academic Press, A Division of Harcourt, Inc., San Francisco, San Diego, New York, Boston, London, Sydney, Tokyo."

Maybe it's time to change our citation conventions. (Or maybe, next time you're in Sydney, you'll have a special opportunity to pick up that book...)

Complementarities in markets and computers

One thing that makes it difficult for markets to clear efficiently is if goods are complements, so that you only want good A if you can also have good B (e.g. you need two licences of adjacent-frequency radio spectrum to carry out your broadband business plan, or you are willing to take job A only if your spouse can get an appropriate job in the same city). If the market isn't designed to take this into account, there might be coordination failures, in which some buyer ends up having paid good money but having gotten only part of what he needs, or in which you and your spouse end up with jobs in different cities. Combinatorial auctions, and labor clearinghouses that accomodate couples, are market designs that seek to avoid these kinds of coordination failures.

The same kind of thing can cause your computer to freeze. If program A needs parts X and Y of your computer memory, and so does program B, and they each lock up one of those components while they try to call the other, you may have to send the children out of the room and reboot. The programming solutions for avoiding this can involve some sort of clearinghouse. Here's an article on the subject from Dr. Dobb's Journal: Lock Options, A compile-time deadlock prevention scheme.

The introduction begins:
"The two major problems in concurrent programs are data races and deadlocks. Races occur when two or more threads are accessing shared memory without proper synchronization. Deadlocks occur when synchronization is based on locking and multiple threads block each other's progress. In a typical deadlock scenario, thread A locks the mutex X, and thread B locks the mutex Y. Now, in lockstep, thread A tries to lock Y and B tries to lock X. Neither can make progress, waiting forever for the other thread to release its lock. The program freezes.
In a sense, data races are the opposite of deadlocks. The former result from not enough synchronization, the latter usually happen when there's too much synchronization and it gets out of hand.
There are sophisticated schemes to prevent races and/or deadlocks, but they either require special language support or strict discipline on the part of programmers. Here I present a solution based on a well-known deadlock-avoidance protocol and show how it can be enforced by the compiler. It can be applied to programs in which the number of locks is fixed and known up front."
HT: Ted Roth

Real estate; disaggregating a bundle of services

There are cracks beginning to show in the way real estate is sold. For a long time, the only realistic option for selling a home was to employ a full service realtor, who sells a whole package of services bundled together, and charges five or six percent of the selling price of the house.

But as the internet has eroded the Multiple Listing Service monopoly on home listings, it is beginning to be possible for sellers to put their own homes on the market, with the assistance of a la carte services from realtors.

One such service in the Boston area, http://eplacehomes.com/ offers just such an a la carte "menu of services". It will be interesting to see where this leads, in a market whose standard, full service contract, with a 6% realtor's commission, became strained as house prices rose into seven figures in many communities. (See this earlier post on broker rebates to buyers.)

Skydeck360: Signaling in the MBA Job Market

Harvard students Abhinav Agrawal, Patrick Chun and Yasser Salem have launched a platform for students to signal interest to employers looking to hire MBA students. The premise of the platform is quite similar to the signaling mechanism used by the AEA, in that the scarcity of the signals is what creates credibility:

"Skydeck360 will go live in October, and will initially be available for only [1st year MBA] students. The tool is designed for simplicity: all students have to do is sign up on the Skydeck360 website and indicate their top choice companies. This data will then be automatically aggregated and shared with recruiters by Skydeck360 in early November."

One interesting facet of the platform is that it is run as an entrepreneurial venture, rather than by the school itself, and so is an interesting marriage of signaling and entrepreneurial market design...

Article: http://www.harbus.org/home/index.cfm?event=displayArticle&uStory_id=677fb978-c83d-4c25-bff3-0ee233de1a5d

Matching with contracts

When Marilda Sotomayor and I wrote our 1990 book on matching, we divided the book into models without money (like the marriage model) and models with money (like auction models), and showed how similar results obtained for both kinds of models. There's been lots of recent progress in unifying those models and understanding why the results were so similar. The most recent paper in this literature is by John Hatfield and Scott Kominers, Many-to-Many Matching with Contracts, and I asked them to write a blog post about it, which appears below.

"A few years ago, Hatfield and Milgrom (2005) introduced "(many-to-one) matching with contracts," a generalization of classical two-sided matching in which contracts between agents specify both (1) a matching and (2) conditions of the match (such as wages, hours, or specific responsibilities). The results of Hatfield and Milgrom (2005) are surprisingly general--although presented using matching-theoretic language, the Hatfield and Milgrom (2005) model encompasses not only two-sided matching but also several package auction models.Hatfield and Milgrom (2005) assumed a many-to-one matching market, that is, a market in which agents on one side of the market (the "doctors") were never allowed to sign more than one contract. Although reasonable for some applications of matching (such as school choice), some matching applications (such as the United Kingdom Medical Intern match) allow "many-to-many matching," in which every agent can be assigned to multiple agents on the other side of the market.In "Many-to-Many Matching with Contracts," we develop a theory of "many-to-many” version of matching with contracts which extends the model of Hatfield and Milgrom (2005) to allow all agents to accept multiple contracts.This framework extends contract matching to a host of applications not previously covered by generalized matching theory, including the United Kingdom Medical Intern match (discussed above), the United States National Resident Matching Program (which allows agents to pair together and match as "couples" who can receive two jobs), and the matching of consultants to firms. Additionally, many-to-many matching with contracts generalizes the theory of bilateral "buyer-seller markets".
We prove that substitutability of preferences (for agents on both sides of the market) is both sufficient and necessary to guarantee the existence of stable many-to-many contract allocations; in many-to-one applications, in contrast, weaker conditions than substitutability guarantee existence. This result shows that, in general, a stable match is not guaranteed to exist in the matching with couples problem, since couples' preferences are generally assumed to be non-substitutable by nature. These results also provide insight into why the necessity result does not hold in the many-to-one matching case, and allows us to identify a new class of non-substitutable many-to-one preferences which are in some sense projections of substitutable many-to-many preferences, and for which the existence of a stable match is guaranteed."

Market prediction and the Challenger disaster

Michael Trick has a post on Models, Information, and Market Rationality which shows a graph of the stock prices of Morton Thiokol, Lockheed, Martin Marietta, and Rockwell, in the hours after the Challenger disaster.
"The stock price for all of the companies immediately dropped 7-8% after the disaster. Within an hour, three companies went back up to being just 2-3% down, while one company further decreased: Morton Thiokol. The company responsible for the O-ring (of Richard Feynman and ice water fame): Morton Thiokol. It is certainly provocative that the market seemed to know something immediately that took an investigation months to determine. ...
But, as Bryan reminds me, this was not exactly a mystery to everyone at the time: the engineers involved strongly suspected early what the issue was and later fed that information to Feynman. So the information was out there and perhaps that information leaked out to the market in the immediate aftermath of the explosion. So perhaps it is not so mysterious after all. And there may well be other explanations for the larger drop off by Motton Thiokol."

Prediction markets and Olympic cities

Over at MidasOracle.org the word is that Chicago won’t have the Olympics in 2016, despite the predictions of a number of well known prediction markets.

"The Chicago candidacy, which was favored by the prediction markets ...is the one that fared the worst."

"The prediction markets are not able to forecast which country will get the Olympics. The IOC is a close aristocratic group that does not leak information. Hence, it is not possible to aggregate information." (emphasis in original)

I guess President Obama also thought that Chicago had a good chance.

Incentives and food safety

In a disturbing story on food safety, the NY Times focuses on ground beef and reports E. Coli Path Shows Flaws in Ground Beef Inspection .

The problem has to do with both incentives and regulation. While companies have incentives to try to avoid selling contaminated food, it turns out there are incentives for not knowing where the contamination originated, and this makes it hard to eliminate. The problem is that most ground meat is a mix of meat scraps purchased from many providers.

"Meat companies and grocers have been barred from selling ground beef tainted by the virulent strain of E. coli known as O157:H7 since 1994, after an outbreak at Jack in the Box restaurants left four children dead. Yet tens of thousands of people are still sickened annually by this pathogen, federal health officials estimate, with hamburger being the biggest culprit. Ground beef has been blamed for 16 outbreaks in the last three years alone, including the one that left Ms. Smith paralyzed from the waist down. This summer, contamination led to the recall of beef from nearly 3,000 grocers in 41 states. "
...
"Ground beef is usually not simply a chunk of meat run through a grinder. Instead, records and interviews show, a single portion of hamburger meat is often an amalgam of various grades of meat from different parts of cows and even from different slaughterhouses. These cuts of meat are particularly vulnerable to E. coli contamination, food experts and officials say. Despite this, there is no federal requirement for grinders to test their ingredients for the pathogen. "

That is, food processors are required to test their final product, but not their ingredients.

"Those low-grade ingredients are cut from areas of the cow that are more likely to have had contact with feces, which carries E. coli, industry research shows. Yet Cargill, like most meat companies, relies on its suppliers to check for the bacteria and does its own testing only after the ingredients are ground together. The United States Department of Agriculture, which allows grinders to devise their own safety plans, has encouraged them to test ingredients first as a way of increasing the chance of finding contamination.
Unwritten agreements between some companies appear to stand in the way of ingredient testing. Many big slaughterhouses will sell only to grinders who agree not to test their shipments for E. coli, according to officials at two large grinding companies. Slaughterhouses fear that one grinder’s discovery of E. coli will set off a recall of ingredients they sold to others." (emphasis added)
...
"The retail giant Costco is one of the few big producers that tests trimmings for E. coli before grinding, a practice it adopted after a New York woman was sickened in 1998 by its hamburger meat, prompting a recall."
...
"But even Costco, with its huge buying power, said it had met resistance from some big slaughterhouses. “Tyson will not supply us,” Mr. Wilson said. “They don’t want us to test.” "

Kidney sales

Here's a very interesting 9 minute YouTube video on kidney sales, including in the U.S.:CNN Reports On The Buying & Selling Of Human Organs - 10/03/09

It argues that (illegal) sales in the U.S. may still be rare, but not rare like unicorns.

HT to Chris. F. Masse, http://www.midasoracle.org/

Course allocation by Budish, updated

Eric Budish's updated (and still remarkable) paper is here:
The Combinatorial Assignment Problem: Approximate Competetive Equilibrium From Equal Incomes,
and Eric himself is now at Chicago's Booth School of Business.

Here is my previous post on the first version of that paper (which was Eric's jobmarket paper).

Hotbeds of innovation: food in Portland

Why are Silicon Valley and Cambridge MA hotbeds of innovation? A nice NY Times story about the culinary scene in Portland Maine, by Julia Moskin, might give some insights: In Portland’s Restaurants, a Down East Banquet .
"Portland’s many chefs and bakers, its turnip farmers and cookbook sellers and assorted mad food geniuses are gearing up for another lively winter.
“I wouldn’t call it a competition, I’d call it a collective,” Josh Potocki, the chef and owner of 158 Pickett St. Café in South Portland, said of the city’s food scene. “We are all trying to raise the level of food in Portland to insanely high.” ...
"Chefs here feed off one another’s work in a way that’s impossible in larger cities (Portland’s population is about 65,000, and it has a compact urban center), constantly eating in and commenting on one another’s restaurants. “I’ve made enemies, for sure,” said Joe Ricchio, a bartender who makes Vietnamese pho on his days off, has a weakness for flaming scorpion bowls, and writes a blog titled Portland Food Coma.
In 2007, Mr. Ricchio started a festively debauched event now known as Deathmatch, a kind of extended “Iron Chef” dinner, with each invited chef contributing a course. “Each one takes five years off your life,” Mr. Ricchio said."...
"Most of Portland’s young chefs ...have worked in — and walked out of — one another’s kitchens. ...Many have cycled through the twin temples of Sam Hayward’s Fore Street or Hugo’s on Middle Street, where Rob Evans is the chef. These are the kitchens that first defined Portland as a destination for rigorously local and regularly delicious food. "...

“Ninety percent of the best restaurants are chef-owned, small, single-operator places,” said Samantha Hoyt Lindgren, an owner of Rabelais, an all-food bookstore on Middle Street ...“That makes a huge difference in the quality of the food and the relationships with purveyors,” she said."..."And for chefs to become owners, the price of entry — key money, kitchen renovation, etc. — is relatively low. "

For related earlier posts, see Market for hand crafted food and Market for hand crafted food, continued

Klemperer's auction design for toxic assets

Over at voxeu.org, Paul Klemperer writes about Central bank liquidity and “toxic asset” auctions, which describes briefly his paper

Klemperer, Paul (2009). “The Product-Mix Auction: A New Auction Design for Differentiated Goods”.

In his Voxeu post he says "The product-mix auction yields better “matching” between suppliers and demanders, reduced market power, greater volume and liquidity, and therefore also improved efficiency, revenue, and quality of information than feasible alternatives. Its potential applications therefore extend well beyond the financial context."

Michael Kearns heads up a new market design program at Penn

The University of Pennsylvania today issued a press release announcing a new undergrad program: Penn Launches Undergraduate Program in Market and Social Systems Engineering, Nation’s First.

"PHILADELPHIA -- The University of Pennsylvania has launched a first-of-its-kind program that will prepare undergraduate students to shape the technologies that underpin Web search, keyword auctions, electronic commerce, social and financial networks and the novel and unanticipated markets and social systems of the years ahead. "
...
"“Traditional programs don’t prepare students to design systems that take into account the goals and incentives of the people who use them,” said Michael Kearns, professor in the Department of Computer and Information Science in Penn’s School of Engineering and Applied Science and the program’s founding faculty director. “We haven’t asked engineering students to take a course in game theory to understand how incentives work or in sociology to understand human behavior. There is now enough science out there on the intersection of these topics to design undergraduate courses.”
In 2003, Kearns developed a Penn course, Networked Life, which engages students in hands-on explorations of the networks in which they participate every day. Now one of the most popular courses at the University, Networked Life also served as a proving ground for the larger MKSE program of which it will become a part.
Kearns is the National Center Professor of Computer and Information Science in Penn Engineering, with secondary appointments in Statistics and Operations and Information Management at The Wharton School. "

Further unraveling of basketball recruiting

Zhenyu Lai, a graduate student in Economics at Harvard, who is taking Market Design this semester, sent me the following email, which he gave me permission to reproduce below.

After last friday's class discussion on unravelling in markets, I came across this article about unravelling in NCAA basketball with a ton of good quotes and anecdotes.

What is particularly interesting is about the role played by agents. Increasingly, agents try to form relationships with potential NBA players early on in their college careers. And they're not just targeting the surefire stars, but gambling on marginal prospects.

Interesting excerpts:

1. Technological improvements aid unravelling markets. Agents are using facebook to make contact with players early.

2. Official rules are abused. Similar to the market example on clinical psychologists, looking at the NCAA rules for agent recruiting is very indicative of the unraveling problem. "Agents are free to contact players in high school or in college through social networking sites, on the phone or in person. As long as there is no written agreement or money exchanged, an agent or a representative of an agent can form a relationship with a player, his family and/or his handlers." An agent is quoted, "It's not breaking the rules. You're just building a relationship with a potential client down the road.". The columnist describes this as "the new normal in amateur basketball."

3. Coaches are in on it too. Much like the market for law clerks, agents (aka judges) develop relationship with coaches (aka law school deans) to ensure that they are making "a sound investment" on their prospect. However, coaches are getting ticked off. The "right way" to do this is apparently for the agents to approach the coach and the player's parents first, not to directly add the player on facebook, where the player may then bypass the coach completely.

4. Agent's argument for unravelling. "Domantay's argument for an agent's trying to make inroads in a profession dominated by an elite few is that if he were to wait until a college player's senior year, he becomes just another name on the list."

5. Argument that unraveling is bad. "If an agent contacts a kid directly, then there should be repercussions. Guys get in with kids and prey on the youthfulness and financial backgrounds and offer things to lock them in and set up a potential for blackmail: If I gave you this, then you owe me." Agents are using runners to form relationships with kids early and leveraging on family contacts and relationships. There is an aura of suspicion where high school kids are wary of who to trust.

6. Agent's motivation for promoting unraveling. "Whoever can control the kid can control the revenue stream -- [maybe] it's a kid going to college benefiting the college coach and leading to a better job. the player dictates the revenue. Everybody is trying to get in sooner and sooner however they can."

Interestingly, the columnist ends off with this quote which is filled with a tone of finality that unraveling is inevitable and an enduring legacy of capitalism,

"The pool of talent, with leagues all over the globe to fill and money to be made, means that anybody with potential is in play to be courted, and so too are their families, their friends, and their AAU and high school coaches. That's the new reality for college coaches. And there's no reason to think it will ever change back."


My thoughts on unraveling in college basketball:

1. High school students are usually at an impressionable age and easily influenced by people close to them, prompting this 'unraveling' process of agents trying to get close to them. While high school students might not be expected to make savvy long-term agent decisions, more needs to be done to make the agent seem like the "bad guy" for approaching the student early. No binding contract is allowed, and kids are empowered to change agents anytime. However, especially if the agent has some influence on a family member (or is a family member..), severing an agent relationship might be tricky. To discourage unraveling, there needs to be lower barriers to changing agents.

2. The NCAA doesn't have jurisdiction over agents (like in the case of federal judges), but some states do where a law states that there can be "significant damage resulting from the impermissible and often times illegal practices of some athlete agents. Violations of NCAA agent legislation impact the eligibility of student-athletes for further participation in NCAA competition". This law is passed in 38 states. However, this law affects the athletes and not the agents. One remedy would be for the NBA to revoke the right of agents to represent their clients if a recruiting violation is found. Agent's licenses could be subject to yearly review. Entry into the agent profession could be tightly regulated.

3. Perhaps NBA draftees could attend an "agent convention" where they could interview various representatives and have the right to choose from among them without any pressure. If it were a standard practice to be connected with legitimate agents only after you enter the NBA, players would then in no way be obliged to sign with an agent early even if they were to have already accepted illegal gifts.

Further consequences of unraveling of law firm hiring

The Crimson reports on the difficulties facing Harvard Law students graduating in this recession year: Tough Times For Harvard Lawyers

"The two-year lag between when firms extend job offers and when employees begin their first year forces firms to predict associate demand far in advance of the start date and leads to inaccurate predictions of hiring needs. According to Weber, the backlog of entry-level associates or “overhang” is negatively impacting firm demand for associates in this recruiting cycle. After the financial crisis pummelled investment banks and the fountain of transactional work dried up, law firms were forced to keep the commitments they made to new hires two years earlier. The result: a spate of deferred start dates that began with the class of 2009 and may continue with the class of 2010. "

A proliferation of penny auctions

Last year I thought about blogging about Swoopo, the "entertainment shopping" site that is run as an "all pay" auction for consumer goods, in which all bidders must pay to bid, but only the winning bidder receives the object. But soon enough there were excellent posts on the subject by others. I particularly like Ian Ayers at Freakonomics, who explained how Swoopo is similar to the "escalation auction" proposed years ago by Martin Shubik, which has become a staple demonstration in game theory classes, and Tyler Cowen at MR, who observes that Swoopo auctions can make a lot of money for the owners of the site, while most of the bidders lose. He writes "In short, swoopo is about as close to pure, distilled evil in a business plan as I've ever seen. " (emphasis in original). And here's the Wikipedia entry.

Swoopo bidders are a bit of a puzzle of the behavioral economics kind: are they like buyers of lottery tickets, who know that they will likely lose but find entertainment value by purchasing the right to dream (see this paper by Emily Oster)? Or are they making mistakes? And if the latter, will demand for this kind of auction dry up? Or will new suckers keep appearing?

But there are other, market level questions we can ask, and I got the beginning of an answer when I did a google search on "swoopo", or another search on "penny auction" . You'll find two things if you click on those searches: there are now a lot of similar auction sites, and there are also plenty of people who are eager to sell you software to set up your own "penny auction," as these sites have come to be known.

(BidRodeo's icon is a man on a bucking bronco, over the motto "Hold on the longest and win!")

What are the questions to which those observations are the beginnings of answers? I guess one is, "is it easy to earn outsized rents by selling to the gullible?". I presume most of the new sites make very little money. Whether they also attract away swoopo's customers or otherwise reduce swoopo's rents remains to be seen.

A new (job market) paper by Edward Augenblick at Stanford suggests that the already-established penny auctions may not disappear in the blink of an eye: Pay-As-You-Go: Theoretical and Empirical Analysis of a New Auction Format

He finds Swoopo to be quite profitable, and the abstract concludes:
"Finally, I attempt to address the long-term prospects of the market for these auctions. Using high frequency auction supply and user data, I estimate the current and optimal supply of auctions for a given number of users. This analysis suggests that the structure of the auction creates barriers to quickly developing a large userbase, allowing the most-established competitor to continue making large profits in the medium-term. This analysis is supported by auction-level data from five competitors. "

HT Eduardo Azevedo and Muriel Niederle

When a protected transaction meets a repugnant one: The MA suit over the Defense of Marriage Act

Same sex marriage raises issues involving both repugnant transactions and protected transactions. On the one hand, marriage is one of our most protected transactions: we reserve many rights for married couples, and a good deal of law and political rhetoric concerns marriage. But many people find marriage between anyone other than one man and one woman repugnant.

Nowhere is this clearer than in the lawsuits being pressed by the Commonwealth of Massachusetts (which was the first U.S. state to recognize same sex marriage) and other parties against the United States, in an attempt to roll back the federal Defense of Marriage Act.

At issue are the rights of married couples. Specifically (because marriage is a protected transaction), spouses are entitled to tax and other benefits. But (because some people find same sex marriage repugnant) the federal law denies same sex spouses married in Massachusetts federal benefits for married couples.

"Because of the law, the plaintiffs said, they were excluded from using federal benefits that opposite-sex couples can obtain, including health insurance programs for federal employees, retirement and survivor benefits under the Social Security Act, and the ability to file joint federal income tax returns."

That quote is from a story ( US lawyers defend letter of gay marriage ban) that emphasizes how this suit puts lawyers in the Obama administration Justice Department in the unusual position of defending the legality of a law that the administration would in fact like to see repealed.
"Government attorneys said in a brief filed yesterday in US District Court that the administration believes the federal Defense of Marriage Act, which bars the federal government from recognizing same-sex marriages, is discriminatory and wants it repealed.
“Consistent with the rule of law, however, the Department of Justice has long followed the practice of defending federal statutes as long as reasonable arguments can be made in support of their constitutionality, even if the department disagrees with a particular statute as a policy matter, as it does here,’’ the attorneys said."

(The MA suit is formally called Commonwealth of Massachusetts v. United States Department of Health and Human Services et al, and an associated suit is Gill et al. v. Office of Personnel Management, and here is the formal complaint, brought by GLAD, the Gay & Lesbian Advocates & Defenders.)

Reserving spaces in crowded places

It may be possible for vacationing Germans to reserve rental lounge chairs at a crowded beach or pool, but in Saudi Arabia it's a crime to reserve rental prayer mats, the Saudi Gazette reports: 2 held for renting Haram prayer space. It appears that both the reserving and the renting are repugnant.

"MAKKAH – Two persons have been arrested for reserving prayer spaces and renting them out to worshippers at Isha and Taraweeh prayer times...“The practice has diminished a lot this year,” Al-Wabil said. “However, we will show no lenience to anyone caught.”All persons who have been arrested for renting out prayer spaces have been foreigners, Al-Wabil said, adding that culprits are identified through a period of surveillance of individual carpets and persons claiming them beginning half an hour before the start of prayers.Sheikh Saleh Bin Fawzan Al-Fawzan of the Board of Senior Ulema and the Permanent Committee for Ifta ruled last week that reserving prayer spaces at the Grand Mosque in Makkah or the Prophet’s Mosque in Madina was “haraam”, or forbidden.“It is forbidden to reserve places in the mosques, unless the person has left for urgent reasons and intends to return soon, as otherwise it is tantamount to taking something by force,” Al-Fawzan told Okaz newspaper on Thursday. “It is also forbidden to rent a reserved place, and the authorities should put a stop to this vice (munkar).”

HT: Anouar El Haji at U. Amsterdam

Are names destiny?

Does your name influence your choice of career? The following paragraph caught my eye, from a NY Times story on testing the safety of motorcycle helmets.

"Hugh H. Hurt, a researcher who developed the Head Protection Research Laboratory at the University of Southern California, and author of the Hurt Report, a seminal study of motorcycle crashes, calls the current Snell M2005 standard “a little bit excessive.” "

Thaler on mandated choice

In the NY Times, Dick Thaler considers how the way people are asked whether they would like to be deceased organ donors might influence the donation rate: Opting in vs. Opting Out .

Thaler thinks organ sales are too widely viewed as repugnant to be politically feasible. And despite the headline, he comes out in favor not of opt in or opt out as defaults, but rather mandated choice, a nudge of the kind he and Cass Sunstein celebrate in their best selling book of that name.

"Here is how it works: When you go to renew your driver’s license and update your photograph, you are required to answer this question: “Do you wish to be an organ donor?” The state now has a 60 percent donor signup rate, according to Donate Life Illinois, a coalition of agencies. That is much higher than the national rate of 38 percent reported by Donate Life America
The Illinois system has another advantage. There can be legal conflicts over whether registering intent is enough to qualify you as an organ donor or whether a doctor must still ask your family’s permission. In France, for example, although there is technically a presumed-consent law, in practice doctors still seek relatives’ approval. In Illinois, the First-Person Consent Law, which created this system, makes one’s wishes to be a donor legally binding. Thus, mandated choice may achieve a higher rate of donations than presumed consent, and avoid upsetting those who object to presumed consent for whatever reasons. This is a winning combination.
THE key, however, is to make signup easy, and requiring people to make a choice is just one way to accomplish it. The private sector could help create other simple methods. Here is a challenge to Mr. Jobs: Why not create a Web site — and a free app for the iPhone — that lets people sign up as organ donors in their home states? "

(Note from my earlier post on Steve Jobs' liver transplant that Massachusetts is one of the few states that allows you to sign up to be a donor online, and see also Thaler's remarks at the bottom of this other earlier post.)

One of the things I like about signing up online is that it allows people to think about organ donation at places other than the Department of Motor Vehicles. I wonder if that's the only place we should be asking people about donation; or whether that location invites you to think too much about fatal car crashes (which are far from the only way to become an organ donor, and which you might prefer not to think about).

On the DMV form at the top of the page you can see that here in Massachusetts we have "opt in" for organ donation, but mandated choice for voter registration. (You can enlarge the photo by clicking on it, if you're reading this on a small screen.) So Thaler's good suggestion would be easy to implement, a very gentle nudge in the right direction.

London Times reports on ads to sell kidneys

Despite the headlines, it isn't clear that they found any actual cash-for-kidney transactions, or the infrastructure to support them, but the willingness is there: Cash-strapped sell their kidneys to pay off debts.

"British victims of the credit crunch are offering to sell their kidneys for £25,000 or more to help pay debts, an investigation by The Sunday Times has revealed.
At least a dozen adverts have appeared on the internet offering kidneys for sale from British “donors”. Five of the sellers corresponded with undercover journalists, who posed as friends and relatives of sick patients to negotiate sales."
...
"Both men said they wanted to help those in need of kidney transplants at the same time as relieving their financial difficulties. A leading doctor said the phenomenon highlighted the need for a public discussion of the issue of selling organs.
Professor Peter Friend, a former president of the British Transplant Society, said: “The West has outlawed it for all sorts of good reasons, but the result is it goes underground. It is really important to have a debate.” Nearly 7,000 people in the UK are waiting for kidney transplants and 300 died last year while on the waiting list.
Offering to sell an organ in England, Wales and Northern Ireland is an offence under the Human Tissue Act even if the seller is planning to travel to another country for the transplant operation. "

Where burial societies go to die

The NY Times has a story on burial societies, cooperatives set up by immigrants in the 1800s and early 1900s to buy and maintain cemeteries. Membership came with burial rights. But the members of the remaining burial societies are aging, and as the society administrators die, it is hard to find replacements: With Demise of Jewish Burial Societies, Resting Places Are in Turmoil .

Various public agencies have gotten involved, e.g. in NY, the New York State Division of Cemeteries exercises general supervision over cemeteries, while the New York State Insurance Department supervises insurance companies. A burial society is both. The Insurance Department's Liquidation Bureau protects consumers who hold policies with failed insurance companies, and its office of Miscellaneous Estates has taken over the administration of some of the burial societies, until their last members are buried.

"Mark G. Peters, who heads the quasi-public Liquidation Bureau...said the government viewed burial societies as a type of insurer. “They may be a historically anachronistic insurance product,” he said, “but we are essentially the only safety net for people still depending on these societies.” "

At a time when the appropriate role of regulators for a variety of markets, including insurance markets, is under new scrutiny, it's reassuring to hear of a fairly unobtrusive regulator stepping up to do the job for which it was designed.

Common deadlines

One way to try to control unraveling of transaction dates is to specify, and try to enforce, particular times at which certain aspects of a market are allowed to unfold. Some examples:

National Letter of Intent for college athletic recruits: A Quick Reference Guide to the NLI

NALP Principles and Standards for hiring by law firms: PART V: GENERAL STANDARDS FOR THE TIMING OF OFFERS AND DECISIONS "Employers offering full-time positions to commence following graduation to candidates not previously employed by them should leave those offers open for at least 45 days following the date of the offer letter or until December 30, whichever comes first. Offers made after December 15 for full-time positions to commence following graduation should remain open for at least two weeks after the date of the offer letter. "

It turns out that this provision needs some enforcement in a recession. The AmLaw Daily reports: S&C vs. Harvard and the Relevance of NALP's 45-Day Rule
"Perhaps nothing epitomizes the anxiety of this recruiting season better than Sullivan & Cromwell's abandoned attempt to bypass a standard, set by NALP, that firms leave offers to students open for up to 45 days. In late July, S&C called several of the nation's top law schools and informed career services personnel at those schools that the firm would not be following the 45-day guideline, according to six sources with direct knowledge of the situation. All six spoke only on the condition that they not be identified publicly. Instead, S&C told the career services personnel, the firm would require prospects to respond yes or no in two weeks."... "S&C backed down quickly and promised to obey the 45-day standard, according to all six sources who spoke to us about the matter. But that doesn't mean the 45-day guideline is set in stone. James Leipold, executive director at NALP, says several firms (none of which he would name) have called the organization asking if they could skip the 45-day rule in some way this season. Several have asked for permission to keep offers open for 45 days or until they collect as many acceptances as they want--whichever comes first. "

Even theoretical physicists need to try to control their market: Theoretical High Energy Physics Groups Common Deadline for Postdoc Offers, signed by many physics departments in 2007.

My favorite is the April 15 resolution by the Council of Graduate Schools, signed by most universities, which is carefully designed to be fairly self-enforcing:
"Students are under no obligation to respond to offers of financial support prior to April 15; earlier deadlines for acceptance of such offers violate the intent of this Resolution. In those instances in which a student accepts an offer before April 15, and subsequently desires to withdraw that acceptance, the student may submit in writing a resignation of the appointment at any time through April 15. ... It is further agreed by the institutions and organizations subscribing to the above Resolution that a copy of this Resolution should accompany every scholarship, fellowship, traineeship, and assistantship offer."

Note that the incentive to violate the agreement by insisting that applicants respond before April 15 is undercut by the fact that the resolution allows students to accept such offers, and then subsequently reject them if they get a better offer. That is, the resolution effectively de-fuses Exploding offers by making them non-binding.

Entrepreneurial Market Design

In the coming weeks, I'll be making a series of posts on a subject I term Entrepreneurial Market Design, the study of creating for-profit marketplaces. Such marketplaces often require innovations (market rules, information flows, timing adjustments, reputation mechanisms) to resolve longstanding inefficiencies (lack of market thickness, adverse selection, high transaction costs, etc). These innovations can create significant value for market participants, and at the same time offer a promising business model for the entrepreneur.

I've had the opportunity to study many such markets, in the capacity of academic researcher, case author, and advisor to students who are have started market-based businesses. The first set of markets I'll list are those founded or managed by recent HBS students with whom I've interacted. Future posts will go into greater detail on these.

TeachStreet. TeachStreet is a platform for matching students with classes, usually in a non-academic setting. Instructors of classes ranging from foreign language to cooking to SAT prep to belly dancing post listings on TeachStreet.com. Users browse through classes and sign up, and Teachstreet takes a commission for each new student. Julie Sandler, a current HBS student, is currently investigating how to expand to the platform to include children's classes. www.teachstreet.com

RelayRides. Concisely described as a peer-to-peer version of Zipcar. Car owners sign up to make their cars available for rental, naming their own rates and hours. Renters select from available cars. In theory, prices could be lower than in Zipcar and fleet size could be much larger. This looks like a classic two-sided network, but with some intriguing challenges of insurance, monitoring, and adverse selection. The founders are HBS students Shelby Clark and Nabeel Al-Kady. http://www.relayrides.com/check-zip.cgi?zip=21202&x=10&y=16

ClearMechanic. ClearMechanic is a platform to better connect auto mechanics with their customers. In an industry often considered technologically backward and rife with trust problems, ClearMechanic is meant to offer transparency and online accessibility to auto-owners. Using ClearMechanic, customers can go online to see the where their repair is in the work queue, learn about the repair being done, and interact with the repair shop. It also serves a marketplace for complementary products, such as accessories, insurance, repurchase options. The founder and CEO is Brad Simmons, a former student of my MBA class Managing Networked Businesses. www.clearmechanic.com

VigLink. VigLink is a startup that describes itself publicly as “building a unique platform for the real-time optimization of affiliate marketing." The founder, Oliver Roup is a recent HBS graduate and former student of Managing Networked Business. www.viglink.com

Cork'd. Cork'd is a social network for wine lovers. The founder is wine celebrity Gary Vaynerchuk, and the CEO is Lindsay Ronga, a former student in Managing Networked Businesses. Among other goals, Cork'd would like to match users with their favorite wines. www.corkd.com

SaleAwayWithMe. SaleAwayWithMe is a website that offers users customizable notifications about sales from their favorite brands. SaleAwayWithMe differentiates itself from spammy newsletters in that specific brands can be chosen, their sales are consolidated into a single list, and users can set thresholds (e.g. only include the most popular notices, such as sale notices that XX% of recipients click on.) SaleAwayWithMe is in a very early state, and was founded by former HBS student Sumir Meghani. www.saleawaywithme.com

I've recently spoken with all of the founders/managers of these companies, and each is willing to work with students who choose to study the business as part of the class project.

Nagel's guessing/beauty contest game: a famous experiment in game theory

Much of game theory concerns how ideally rational players should behave when they interact with other ideally rational players, when everyone's rationality and information is common knowledge. Practical market design, of course, has to also concern itself with how games will be played among humans, which is one of the reasons experimental game theory (and experimental economics generally) is such a useful tool, as a complement to game theory.
An important 1995 paper in the AER by Rosemarie Nagel (“Unraveling in Guessing Games: An Experimental Study") reported an experiment in which this tension was made very clear. In one form of the game, a large number of people are asked to pick a real number between 0 and 100, and the winner will be the person who picks the number closest to 2/3 of the median of all the numbers chosen.
This game shows off the tension between playing a game with perfectly rational players and playing the same game with a sample of humans, even if you are perfectly rational yourself. If all the players are perfectly rational, no one will ever choose a number other than 0, and this is the only equilibrium. (You can prove it this way: no matter how close the median number chosen is to 100, 2/3 of 100 will be closer to 2/3 of the median than will any higher number, so no rational player will ever choose a number larger than 66.66. So the median number chosen in the world of all perfectly rational players will never be higher than 66.66, and so 2/3 of the median will never be higher than 2/3 of 66.66, and so no rational player will choose a larger number, and so forth: in the world of all rational players, no one chooses any number larger than 0.
But of course, among humans, many people do choose numbers larger than 0, and so if you cleverly choose zero, you will know that you are smarter than they are, but you won't win the game. The game will be won by someone who chose a positive number nearest to 2/3 of the median. Maybe someone who chose a number near 2/3 of 66, or 2/3 of 2/3 of 66... And indeed that has been the case, with the modal number chosen dropping as players gain experience. Many experiments have followed that original 1995 experiment, some conducted in newspapers among thousands of participants. (Here are the slides I presented about that series of experiments in the first lecture of my Experimental Economics course this past Spring.) A recently reported experiment was among chess players, who turn out to be a lot like humans: Six thousand chess players took part in a beauty contest! By Christoph Bühren and Björn Frank, University of Kassel. (See also Jeff Ely's nice account here: Grandmasters Play the Beauty Contest Game)
One of the things that struck me about the report by Bühren and Frank was that they include A historical note on the Beauty Contest. They trace the game back to a 1981 French puzzle magazine, which, astonishingly, also seems to have run a large scale experiment among their readers:

"In 1981, the French magazine "Jeux & Stratégie", a popular magazine devoted mainly to strategic board games, but also covering card games and mathematical games, arranged a big readers' competition consisting of mathematical puzzles but also problems from games such as chess, bridge and go. Ledoux (1981) reports on almost 15,000 participants, 4,078 of them being ex aequo, hence the winner had to be decided in a playoff. All first round winners received a letter with new puzzles, and to avoid another round with multiple winners, chief editor Alain Ledoux invented in the last question of this letter what is today known as the Beauty Contest (the name given to it by Ledoux, according to an email to us from July 9th, was “psycho-statistique”, although this does not appear to have appeared in print). Readers were asked to state an integer between 1 and 1,000,000,000, the winning number being the one closest to two third of the average! The average turned out to be 134,822,738.26, two third of this being 89,881,825.51. This is 8.99 percent of the maximum number, markedly less than what is typically found in first rounds of Beauty Contest experiments. However, as explained above, the participants had been pre-selected, having solved a series of puzzles in the first round of the contest, and they knew that everyone else was pre-selected. Both facts should result in the pretty high depth of reasoning."


Scientists and scholars spend a lot of effort tracing back "first" discoveries, and this one is a great find. Nagel's original paper already referred to the fact that the great game theorist Hervé Moulin discussed the game in one of his books, and elaborated on the dominance solvable structure underlying the proof I sketched above. (It was this iterative-reasoning structure that Nagel's original experiment was designed to investigate, and the game has found wide use since then for that purpose, see e.g. the 2006 AER paper by the two (now) British economists Miguel Costa Gomes and Vincent Crawford, "Cognition and Behavior in Two-Person Guessing Games: An Experimental Study". The two-person games have a simplicity that lets alternative hypotheses be more easily separated, in this connection see also the 2008 GEB paper by Brit Grosskopf and Rosemarie Nagel, "The two-person beauty contest. )

Of course, it often happens that, once an important contribution is made and understood and disseminated and built upon, prior discoveries are uncovered. It's good to rediscover earlier attempts, that may have been forgotten because they were "before their time", i.e. because they didn't lead to a lasting scientific or cultural conversation when first proposed.

I once wrote about this as follows:
"Columbus is viewed as the discoverer of America, even though every school child knows that the Americas were inhabited when he arrived, and that he was not even the first to have made a round trip, having been preceded by Vikings and perhaps by others. What is important about Columbus' discovery of America is not that it was the first, but that it was the last. After Columbus, America was never lost again..." (Roth and Sotomayor 1990, p. 170):

(In a similar vein, Jack Rosenthal, writing the On Language column in the NY Times Sunday Magazine, speaks of "...Stigler’s Law of Eponymy, which states that any scientific discovery named for someone is not in fact named for its actual discoverer. ...Stephen Stigler, the University of Chicago statistician who proposed the law in 1980, attributed it to the sociologist Robert Merton, who suggested something similar in 1968.")

Some final notes (for those of you who have followed to the end of this long post).

Stigler's Law might equally well be applied to the name of Nagel's experimental game. She initially called it a "guessing game," but also referred to Keynes' famous metaphor about investing in the stock market
""[P]rofessional investment may be likened to those newspaper competitions in which the competitors have to pick out the six prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors as a whole; so that each competitor has to pick, not those faces which he himself finds prettiest, but those which he thinks likeliest to catch the fancy of the other competitors, all of whom are looking at the problem from the same point of view."

This isn't a perfect analogy to the guessing game; as Nagel suggested, if the goal were to pick the average number (instead of 2/3 of the average), the game would be as difficult for perfectly rational players as for humans, since there would be a continuum of equilibria. But the "beauty contest" name has stuck. As it happens, there's another important family of experimental games, introduced in a 1990 AER paper by John B. Van Huyck, Raymond C. Battalio, and Richard O. Beil, "Tacit Coordination Games, Strategic Uncertainty, and Coordination Failure" that is much closer to Keynes' beauty contest.

The Nagel paper also has "unraveling" in the title, which refers to the sense in which the "p beauty contest game" with p less than 1 is a reduced form model of the kind of unravelling we see in labor markets and other kinds of markets, e.g. in which employers sometimes try to be earlier than their competitors, with a resulting race to the bottom.

Full (and proud) disclosure: back in the previous millenium, Rosemarie was a postdoctoral fellow of mine, at the University of Pittsburgh, 1994-5. She suggests I mention that her initial inclination to do a careful experiment on this game came from considering her own thought processes when playing the game, and that "one should participate in many experiments when being or wanting to become an experimenter..."

College admissions in Illinois

The long running story about politically connected candidates getting preferential admissions at the University of Illinois reached some sort of (perhaps interim) conclusion today: U. Of Ill. President Resigns After Scandal
"CHAMPAIGN, Ill. (AP) -- University of Illinois President B. Joseph White, who has been at the center of an admissions scandal, has resigned.
... White has been under fire since this summer over reports that the university admitted politically connected students over more qualified ones at its Champaign-Urbana campus."

The market for college athletes

Putting the Amateur Myth to Rest by Allen L. Sack

"I agree with Brand that the term amateur is not a good fit for modern college sports, but it has definitely not outlived it usefulness for the NCAA. The myth of amateurism shields college sport from tax collectors and members of Congress, seeking unrelated business income taxes, and allows the NCAA to cap athletic subsidies at room, board, tuition and fees. The NCAA will probably play the “amateurism card” to fight a class action lawsuit filed this summer over its use of former athletes’ likenesses to sell licensed products.
So what can the NCAA do to end the pretense that big-time college athletes are amateurs, short of abandoning athletic scholarships or openly turning pro? The first step is to take Brand’s “off the cuff” suggestion seriously and drop the term amateur when referring to scholarship athletes.
The next step would be to adopt a model that continues the practice of awarding athletic scholarships to the nation’s most talented athletes, but eliminates conditions generally associated with employment. Borrowing a term from Myles Brand, I would call this the “collegiate model.”
Under current NCAA rules, athletes who fail to meet athletic expectations can lose their athletic scholarships, i.e., be “fired” at the end of the year, thus transforming athletic scholarships into contracts for hire. And because athletes are subject to their coaches’ control in return for payment of room, board, tuition and fees, they arguably meet common law definitions of employees. The collegiate model, on the other hand, would make satisfactory progress in the classroom the condition for renewing athletic scholarships. "

Books on demand (Espresso in the Square)

The Harvard Crimson reports on a new dimension to the book market in the age of the internet, books printed on demand (and delivered by bicycle:): Store Launches On-Demand Books

"Starting next week, customers at Harvard Book Store will be able to buy in minutes books that once would have taken weeks to find. The service comes courtesy of the Mass. Ave. retailer’s new printing machine, which will make it the first bookseller in the nation with the ability to print 3.6 million titles on demand. The Espresso Book Machine—produced by New York-based firm On Demand Books—has been rolled out to a select few stores to date, but the one at Harvard Book Store will be the first with access to the 2 million public-domain texts digitized by Google, which also announced a deal with On Demand last Thursday. "
...
"The Espresso Book Machine will be able to print a 300-page paperback book in four minutes, according to Gain, who added that printed books will be competitively priced and indistinguishable from those sitting on the shelves. Customers will be able to request a book to be printed online or in the store, after which they can either pick it up in-store within minutes or have the book delivered by bicycle either the same or next day. Books can also be shipped to domestic or overseas locations. "

Another step in the unraveling of the baskeball market

In a further unraveling of the market for basketball players, Jeremy Tyler, 18, "became the first player to drop out of high school to play basketball professionally outside the United States." Here's an early story: High School Star to Play Professionally in Israel.

The deal with Macabee Haifa has since been finalized, and InsideHoops.com editor says: So instead of being surrounded by little kids on a HS basketball court, Tyler will make 140k and play with adults he can actually learn from. And then instead of being a college freshman a year later, he’ll probably do the same, perhaps for a bit more money. So he’ll have earned a quarter million dollars or so in two years before most players earn a penny (aside from the under the table stuff that just about every good young player gets). The thing is, I don’t think an overseas team is going to go out of their way to train him more than they would any other player, considering he’s only committed to be there for one year. Still, he should at least get way more out of being there for a year than he would as a HS senior."

And, it's not just basketball: here's a story from the Cleveland Plain Dealer on both Tyler and baseball star Bryce Harper: Teens turning pro? Their choice

"Baseball player Bryce Harper of Las Vegas and basketball player Jeremy Tyler of San Diego have found ways to manipulate their sports' entry-level restrictions and turn pro early, much the same way Bernie Kosar did in 1985 when he graduated two years early from Miami and entered a supplemental draft so the Browns could take him. "

Unraveling in junior tennis:

Not only do the most competitive tennis players have to start training while young, they have to train more intensely than is compatible with attending school: The Career Path to Pro Tennis Often Passes High School By

"American junior tennis has had a major change in the last five years. Aspiring pros now commonly abandon regular school for home or online educational programs. Although alternative schooling is not new to junior athletics, tennis is perhaps the only sport whose full participation requires it because of year-round competition and travel. "


Apparently the issue is that tennis players are ranked in part by the number of tournaments they do well in, so they have to play in lots of tournaments.

Regulating fast trading on Wall St

David Silver has a nice article in the NYT comparing the proposed regulation of "flash trading" with some of the century old regulation of floor trades (and of "front running" before customer orders generally): A Short History of Fast Times on Wall Street . ("Flash trading":= Some exchanges have, for a fee, given some traders "pre-routing display" of bids and asks milli-seconds before they are shown to most traders. See Direct Edge.)

"Supercomputers allow certain traders to profit by executing trades in milliseconds, a practice known as high-frequency trading. These traders also use a technique called flash orders that gives them a sneak peek at other investors’ orders to buy and sell stock. ...

"...similar criticisms have been made for over 100 years, since the days when trades on the New York Stock Exchange were executed by humans using notepads and pencils.
Even back then, critics claimed that the exchange members who were physically present on the floor could get trading information and execute their own orders faster than anyone else. The creation of the Securities and Exchange Commission in 1934 included the power to regulate the buying and selling of securities by exchange members trading for themselves, rather than for customers.
A Roosevelt administration official testifying in support of the 1934 legislation, Thomas Corcoran, described such floor traders as “chiselers.” This referred to their ability to quickly buy from sellers at prices lower than they would otherwise get, and promptly resell to buyers at prices higher than they would otherwise pay.
These complaints were well founded. By being on the exchange floor, traders could see with their own eyes the prices of completed trades minutes before they appeared on the exchange tape. Executing their own orders gave them a head start over ordinary investors, whose orders could take minutes to reach the floor. As a former Wall Street Journal editor wrote in 1903, “They know the prices even before they are recorded on the tape, and they are able to join in every upward movement the moment it begins, and to abandon it the moment it shows signs of wavering.”
In 1909, a committee created by Gov. Charles Evans Hughes of New York to study stock market abuses similarly commented that floor traders “acquire early information concerning the changes which affect the values of securities,” giving them “special advantages” over other traders. "

Market for (smuggled) cultural treasures

Trading in certain kinds of antiquities and "cultural treasures" is regarded as a repugnant transaction in many parts of the world, and governments seek to prevent it in various ways. (For example, France sometimes exercises a right to "preempt" auctions of art it deems important, essentially by exercising a right of first refusal (see footnote 3 in the linked paper). Many countries make exports of certain kinds of "cultural treasures" illegal.


Ray Fisman and Shang-Jin Wei have a paper that attempts to measure how often such laws are flouted (by comparing export declarations and U.S. import declarations--not everything that is illegal to export is illegal to import). It's called "The Smuggling of Art and the Art of Smuggling: Uncovering the Illicit Trade in Cultural Property and Antiques ," AEJ-Applied Economics, 1,3,2009.


It turns out that the level of illegal exports from a country is correlated with how often its UN diplomats violate NYC parking regulations.

Cent mail: signalling that your email isn't spam

Here's a new twist (from Yahoo! Research) on paying to send email as a barrier to spam: a 1 cent donation to charity for each email buys you an encrypted stamp that assures the recipient that you paid: Pay-per-email plan to beat spam and help charity.

"Yahoo! Research's CentMail resurrects an old idea: that levying a charge on every email sent would instantly make spamming uneconomic. But because the cent paid for an accredited "stamp" to appear on each email goes to charity, CentMail's inventors think it will be more successful than previous approaches to make email cost. They think the cost to users is offset by the good feeling of giving to charity."

"Some previous schemes, such as Goodmail, simply pocketed the charge for the virtual stamps. Another deterred spammers by forcing computers to do extra work per email; and Microsoft's version requires senders to decipher distorted text."

Here's an earlier post.

Here's another story: Will Users Donate a Penny Per Email to Fight Spam, Yahoo Wonders, which notes
"It’s not clear how much the proposal would help, however, since so much of the spam is now sent using botnets, which are networks of zombie PCs whose owners have no idea their computers are part of a massive spamming organization."

Congestion in online job search

Companies that post job openings online get access to many resumes, but may have trouble sorting through them. Phyllis Korrki writes: Where, Oh Where, Has My Application Gone?
"GETTING a rejection letter is a painful part of job hunting, but at least it means you’ve been noticed. These days, I’ve been hearing about more job hunters who respond to online job postings, only to hear nothing back from the company. Ever."
"...before you get too angry at companies that ignore you, consider what they are up against.
First, the Internet has made it absurdly easy to apply for jobs. This means that unqualified people are clogging the system with their wing-and-a-prayer applications.
Then add rising numbers of unemployed people. More job seekers — qualified, unqualified and desperate — are hitting the send button. Acknowledgments are going by the wayside as recruiters confront hundreds of applications for a single job.
In fact, organizations received 75 percent more applications, on average, in the first half of 2009, compared with the same period in 2008, according to a survey by the Corporate Executive Board, a network of executives and a research company. "

How about business-oriented social networks liked LinkedIn, in which people can recommend each other?
" "Obtaining an employee referral is a good move, as far as it goes. There is just one problem: Nowadays “the referral channel is jammed in the same way that other channels are jammed,” Mr. Safferstone said."

A fast auction for gift cards

TC50: Gift Card Auction Site Rackup Aims To Shake Up Market
A "fast auction" in which the high bidders buy themselves gift cards and compete for bonus amounts on the card, so that different cards sell at different discounts.
"Rackup’s team is lead by Marc Rochman and is supported by a board that includes Stanford Prof. Paul Milgrom, one of the most prominent experts in auction theory, and Duke Prof. Dan Ariely, author of “Predictably Irrational”. The company raised early-stage funding from the founders and some private investors, amounting up to $3.5 million."

HT: Joshua Gans

Law firm recruitment, rescinded offers, etc.

Law firm recruitment begins with the recruitment of summer associates, many of whom are traditionally made offers for permanent employment starting the next year (a tradition that has been somewhat disrupted by the recession, which has led to both the withholding of offers and sometimes to their subsequent cancellation or postponement). How might this affect the norms, customs and rules by which recruiting is conducted? (The organization that tries to foster these norms and rules, through a statement of principles and standards, is NALP, formerly known as the National Association for Law Placement.)

Last year, the blog Above the Law urged students holding multiple summer offers to accept one quickly: Accept Your Offers: Stop Screwin' Around You Kids Screw Around Too Much.
"If you are a 2L sitting on multiple offers, could you please -- for the love of God -- accept one of them already, so the spots you don't want can be filled by other candidates? ... And it might be in your best interest as well. The career services office at U. Penn Law School sent around a letter to students today, urging them to make a decision:
We recommend that you do not wait until the expiration of the offer to render a decision... Wednesday, we learned that one of your 2L colleagues had their offer for employment rescinded before the expiration of the offer because the firm experienced a higher than usual acceptances from outstanding offers..."

This year, Above the Law suggests (tongue in cheek?) Accept Your Offers: All of Them.
"It seems to me that the "social compact" between firms and students has completely broken down. We've been living in a Hobbesian state of nature for almost a year now.
NALP tells students that they should not hold more than two offers open, or else. Or else what? As Jim Leipold, executive director of NALP, recently observed, "There are no NALP police."
As far as we know, NALP hasn't done anything to firms that have disrespected the 45-day "open offer" period. What are they going to do to students that accept more than two offers?
We asked NALP these questions directly. We asked why a student should be willing to follow the NALP guidelines when firms have flouted them with impunity during the recession. We asked why students should adhere to NALP guidelines when law school deans are saying that the firms will not.
We received no response. So now we're asking you:
Shouldn't an intelligent 2L accept every offer of summer employment he or she gets? If some firms revoke that offer quickly, so what? It's probably a firm you don't want to summer with anyway.
Once you've decided which firm to go with, you can politely decline the other offers you accepted..."

While I think that reputational concerns will prevent law students from accepting multiple offers, there is obviously a great deal of justified concern when law firms make offers and then rescind them (we're not just talking about summer offers now). Here is NALP's statement on rescinded offers (which begins "Please note: NALP's Principles and Standards do not condone rescinding offers. However, in recognition that rescission does occasionally occur, NALP presents this article with suggestions for ameliorating the situation. ")

NRMP to implement "managed scramble"

After the medical match, some applicants and positions remain unmatched. Right now, that is handled through a fairly decentralized "scramble." (Fairly decentralized, but with some centralized distribution of the information about who is matched and unmatched. It is more centralized than the economics job market scramble, since the NRMP knows immediately who all the unmatched applicants and participants are). Giving the medical scramble some more structure is now under active consideration.

"The NRMP Board of Directors, meeting in Washington, DC on May 4, 2009, voted to proceed with implementation of a "managed" Scramble for the Main Residency Match. A joint NRMP-AAMC work group will continue to refine the plan, which will require programs to offer and applicants to accept unfilled positions through the NRMP R3 System during Match Week. A "managed" Scramble would be implemented no earlier than the 2011 Match, according to NRMP Executive Director Mona M. Signer. " (http://www.nrmp.org/ on 9/13/09)

Playing the admissions game

A recent NBER paper focuses on how student behavior has changed in reaction to the increasing competition for admission to elite colleges (resulting both from the growing size of the high school graduation cohorts, and the increasing rates of application to and attendance at college). They report that more students are taking AP exams, volunteering, and applying to more colleges.

Playing the Admissions Game: Student Reactions to Increasing College Competition by John Bound, Brad Hershbein, Bridget Terry Long - #15272 (ED LS)

Abstract: Gaining entrance to a four-year college or university, particularly a selective institution, has become increasingly competitive over the last several decades. We document this phenomenon and show how it has varied across different parts of the student ability distribution and across region, with the most pronounced increases in competition being found among higher-ability students and in the Northeast.
Additionally, we explore how the college preparatory behavior of high school seniors has changed in response to the growth in competition.
We also discuss the theoretical implications of increased competition on longer-term measures of learning and achievement and attempt to test them empirically; the evidence and related literature, while limited, suggests little long-term benefit.
http://papers.nber.org/papers/W15272

"Overall, high school students in 2004 engaged in significantly more behavior associated with college preparation, on average, than did their counterparts from 10 and 20 years before. The share taking at least a semester of calculus in high school rose from 9.2 percent to 15.2 percent between 1982 and 2004. In just the 12 years from 1992 to 2004, the fraction of seniors having taken at least one Advanced Placement (AP) exam nearly doubled, from 16.5 to 30.9 percent." (p12) (but reported time spent on homework is down)

"...data from CIRP's Freshman Survey shows that the percentage of college
freshmen who regularly volunteered during their senior year of high school increased rapidly from about 45 percent in 1987 and 1988 up to about 70 percent by 2000, where it has roughly remained since." (p14)

"While 25 percent of students had applied to four or more schools in 1972, more than half had by 2004. Figure 4 shows that the percentage of students applying to seven or more schools rose from about 3 percent in 1972 to 18 percent in 2004. This implies that more than half of the increase among those applying to four or more schools is driven by those applying to seven or more schools; within the last ten years, more than three quarters of the increase
is from those applying to seven or more schools. The increase in application rates has been widespread throughout the selectivity distribution, with students at highly selective institutions not only sending more applications on average, but also increasing the number of applications sent at a faster pace earlier on.
Another proxy for college application behavior is the number of SAT score reports sent to various colleges.16 When taking the SAT, students are allowed to send up to four score reports at no additional marginal cost. However, in recent years, students have been sending far more score reports. As shown in the three panels of Figure 5, the number of scores sent (and the likelihood of sending more than four) rises dramatically with the student's score. For those with scores above 1400 (around the 97th percentile), the median number of reports sent is around eight, which suggests that even students with very high scores do not feel that they can rely on being accepted into a top school." (p19)

Penny wise and pound foolish on kidneys and antirejection drugs

Medicare pays for kidney transplants (which are both better and cheaper than the dialysis it replaces and that Medicare also pays for). But Medicare pays for only three years of anti-rejection drugs, which transplant recipients must take as long as they still have a transplanted kidney. It doesn't make any sense, not even financial sense. Here's a nicely reported story by Kevin Sack from the NY Times: U.S. Cost-Saving Policy Forces New Kidney Transplant

"The story of Ms. Whitaker’s two organ donations — the first from her mother and the second from her boyfriend — sheds light on a Medicare policy that is widely regarded as pound-foolish. Although the government regularly pays $100,000 or more for kidney transplants, it stops paying for anti-rejection drugs after only 36 months."...

"Most of the cost of [her] dialysis and the transplant, totaling hundreds of thousands of dollars, was absorbed by the federal Medicare program, which provides broad coverage for those with end-stage renal disease.
Despite that heavy investment, federal law limits Medicare reimbursement for the immunosuppressant drugs that transplant recipients must take for life, at costs of $1,000 to $3,000 a month."...

"By late 2003, her transplanted kidney had failed, and she returned to dialysis, covered by the government at $9,300 a month, more than three times the cost of the pills. Then 15 months ago, Medicare paid for her second transplant — total charges, $125,000 — and the 36-month clock began ticking again.
“If they had just paid for the pills, I’d still have my kidney,” said Ms. Whitaker, who shares an apartment in the La Jolla neighborhood with her boyfriend, Joseph D. Jamieson. “I’d be healthy, working and paying taxes.” "...

"Bills have been introduced in Congress since 2000 to lift the 36-month limit and extend coverage of immunosuppressant drugs indefinitely. They have never made it to a vote, largely because of the projected upfront cost; the Congressional Budget Office estimates that unlimited coverage would add $100 million a year to the $23 billion Medicare kidney program.
But the cost-benefit analysis would seem obvious. The most recent report from the United States Renal Data System found that Medicare spends an average of $17,000 a year on care for kidney transplant recipients, most of it for anti-rejection drugs. That compares with $71,000 a year for dialysis patients and $106,000 for a transplant (including the first year of monitoring)...."

"A provision to cover the drugs is in the sweeping House health care bill, which has cleared three committees. It is uncertain whether the Senate Finance Committee will include it in its bill.
Since 1973, end-stage renal disease has been the only condition specifically covered by Medicare regardless of age. In 1988, coverage was extended for 12 months to anti-rejection drugs, which had recently been developed. Congress gradually lengthened the cutoff to 36 months, and then in 2000 made the benefit unlimited for those who are at least 65 or disabled. The rationale for leaving out younger transplant recipients was simply that the money was not there, Congressional aides said. "

In other kidney news, I understand through the grapevine that the planned September pilot of a national kidney exchange program to be conducted by UNOS has been put on hold for the time being.

Your penny for my two cents: micropayments on the web

Even if you are prepared to pay a penny for my thoughts, the transaction costs would likely deter you, unless the payment can be made automatically. This is the problem facing micropayments in particular, and it makes it hard for newspapers to charge for news.

Harvard's Neiman Journalism Lab reports on Google's marketplace proposal, which would allow customers to maintain a Google account that could be billed without requiring the customer to maintain accounts or reveal information to each content provider: Google developing a micropayment platform and pitching newspapers: “‘Open’ need not mean free”

Authors' Registry: Clearinghouse for small payments

How should small fees for copying copyrighted material be collected and distributed? About once a year, I get a communication from The Authors Registry , which works to find authors on whose behalf such fees--presumably collected by the penny in copyshops and libraries--have been collected.

"The Authors Registry is a not-for-profit clearinghouse for payments to authors, receiving royalties from organizations and distributing them to U.S. authors. It was founded in 1995 by a consortium of U.S. authors' organizations: The Authors Guild, The American Society of Journalists & Authors, the Dramatists Guild, and the Association of Authors' Representatives. To date, the Authors Registry has distributed over $8,000,000 to authors in the United States."

They seem to be closely affiliated with the Authors' Licensing & Collecting Society (UK).

"The Authors’ Licensing and Collecting Society (ALCS) represents the interests of all UK writers and aims to ensure writers are fairly compensated for any works that are copied, broadcast or recorded. Writers’ primary rights are protected by contract, but it is the life of the work over the following decades that needs to be monitored and fairly rewarded. It is with secondary rights that copyright has an important role to play in protecting writers and creators from unpaid use and moral abuse of their work. Secondary use ranges from photocopying and repeat broadcast transmission in the UK and overseas to reproduction in journals and repeat use via the internet and digital reproduction."

"Photocopying of books and serials currently accounts for approximately 70% of income. The ALCS together with the Publishers Licensing Society (PLS) has appointed the Copyright Licensing Agency (CLA) to act as its agent to license the photocopying right on its behalf and on behalf of its members on a non-exclusive basis. A small number of CLA licences now include the authority for limited scanning. Public Lending Right ALCS administers German, Austrian, Dutch and French Public Lending Right (PLR) for UK authors, and is in the process of entering into agreements with other European countries where PLR is being incorporated in to national legislation. UK PLR is administered by Public Lending Right based in Stockton-upon-Tees and funded by the Department of Culture, Media and Sport (DCMS). "

The collections are quite small; e.g. my recent statement, which seems to originate in the ALCS looks like this:

PHOTOCOPYING - OVERSEAS Miscellaneous CLA Monies - Inside EU 1.02
NON TITLE SPECIFIC Miscellaneous CLA Monies - UK 40.03
PHOTOCOPYING - OVERSEAS Miscellaneous CLA Monies - Outside EU 15.52
SUBVENTION ON ACCOUNT Miscellaneous CLA Photocopying Fees 7.97
PLS Balancing Payment General CLA Photocopying Fees 2007 - 2008 34.56

Update: for those of you who don't normally click to see comments, the comment below by Jon Baron, the eminent Penn psychologist, is well worth reading...