“Coping with difficult decisions: An Experimental Economics perspective” in Dusseldorf

I'm arriving in Dusseldorf today, for a workshop marking the end of a years-long project originally organized by Reinhard Selten:

Closing workshop of the Academy Research Center

“Rationality in the Light of Experimental Economics”

Coping with difficult decisions: An Experimental Economics perspective

Part I: Mini-School on complex experiments

10:00 – 11:00    Introductory lecture on complex experiments

Sabine Pittnauer (Univ. Bonn): Procedural rationality in complex decision problems

11:00 – 12:00   Presentations by young researchers (Part I)

Sven Nolte (Finance Center Muenster): An Experimental Analysis of Annuity Aversion

David Schindler (Univ. Munich LMU): Risk, Time Pressure, & Selection Effects

Ori Plonsky (Technion): Reliance on small samples, the wavy recency effect and similarity-based learning

Annika Herr (Univ. Düsseldorf): Organ donation in the lab: Preferences and votes on the priority rule

12:00 – 12:30 Coffee Break

12:30 – 13:30     Presentations by young researchers (Part II)

Josue Ortega (Univ. Glasgow): Rational Inattention in Online Dating

Katharina Momsen (Univ. Mannheim): Buying Goods of Unknown Value - An Experiment

Efrat Aharonov (Technion): On the imitation of mistakes

Volker Benndorf (Univ. Düsseldorf): Voluntary Disclosure of Information and Unraveling

13:30 – 15:00     Lunch research seminars

Group Prof. Ido Erev

Mira Fischer (Univ Köln): Investment in Learning and Beliefs about Knowledge and Talent: Experimental Evidence on the Effects of Two Dimensions of Confidence

Stephan Germer (Univ. Hannover): tba

Claudia Möllers (Univ. Düsseldorf): tba

Anja Rey (Univ. Düsseldorf): Representing and Solving Hedonic Games with Ordinal Preferences and Thresholds

Rebecca Schmitt (TU Kaiserslautern): Bridging the Attitude-Preference-Gap: A Cognitive Approach To Preference Formation

Nadja Wolf (Univ. Hannover): Mental Accounting in Tax Evasion Decisions – An Experiment on Underreporting and Overdeducting

Group Prof. Uri Gneezy

Anna Brandt (Univ Bern):  Personality correlates of willingness to compete

Marianne Carson (Royal Veterinary College): Behavioural adaptations of poultry production stakeholders to disease outbreaks and different control policies in Bangladesh

Henning Cordes (Finance Center Muenster): Perceiving the Real Value: How Inflation Communication Affects the Attractiveness of Delayed Consumption

Judith Schneider (Finance Center Muenster): tba

Lisa Spantig (Univ. Munich LMU): High-Stakes Non-Monetary Decision under Risk

Valentin Wagner (Univ. Düsseldorf): Shying Away from Demanding Tasks? Experimental Evidence
on Gender Differences in Multiple-Choice Tests

15:00 – 16:00     Poster session

Part II: Plenary talks and panel discussion on coping with difficult decisions

16:00 – 16:15     Welcome address

16:15 – 17:00     Professor Uri Gneezy: Lying Costs and Incentives

17:00 – 17:45     Professor Ido Erev: On maximization, complexity, and the effect of economic incentives

17:45 – 18:15     Coffee break

18:15 – 19:00     Professor Alvin E. Roth: Repugnant transactions and forbidden markets

19:00 – 20:00     Panel discussion: “Coping with difficult decisions: What do we know about how difficult decisions are made and how they can be improved?”

                              Moderation by Professor Martin Weber

20:00                    Closing remarks and supper

A blizzard of short videos from UBS Nobel Perspectives--from a set of interviews conducted over two days at Stanford

UBS has commissioned a series of interviews about Nobel laureates. A film crew spent two days at Stanford interviewing me, my wife Emilie, and some of my students and colleagues (Mike Ostrovsky, Muriel Niederle, Sandro Ambuehl, Paul Milgrom), and they then conducted some interviews elsewhere also (of Tim Harford and Paul Donovan). You can see a collection of resulting videos at their site here:

How do we make matches that last? Alvin E. Roth, Nobel Laureate, 2012

The longest video is this one, 8 minutes, in which a number of people appear:




A less organized list of the collection of videos is below:

Alvin E. Roth meets his hero - Nobel Perspectives - YouTube

▶ 1:35

www.youtube.com/watch?v=uUNIwT0i498

9 hours ago - Uploaded by UBS

... Shapley is one of the giants of game theory - meeting him was an impressive moment for me.' Nobel-Prize ...

The rules of the market - Alvin E. Roth - Nobel Perspectives ...

▶ 2:00

www.youtube.com/watch?v=V-jviWNBs1M

9 hours ago - Uploaded by UBS

Markets don't operate in a vacuum, they need rules to function properly. Watch Nobel-Prize winner in ...

Alvin E. Roth finally gets a high school diploma - Nobel ...

▶ 2:40

www.youtube.com/watch?v=jviVUC4MkhU

9 hours ago - Uploaded by UBS

Alvin E. Roth might be a Nobel Laureate, but he never graduated from high school. At least now he has an ...

Alvin E. Roth - his life and work - Nobel Perspectives ...

▶ 8:39

www.youtube.com/watch?v=yc7sPyQyZm0

9 hours ago - Uploaded by UBS

'The magic of markets doesn't happen by magic', says Roth. In other words, for people to come together ...

Matching kidney donors with recipients - Alvin E. Roth ...

▶ 5:12

www.youtube.com/watch?v=J9OYmUnecfU

9 hours ago - Uploaded by UBS

Alivin E. Roth had already come up with a way to match doctors with jobs in hospitals and children with places ...

Game theory - Alvin E. Roth - Nobel Perspectives - YouTube

▶ 4:35

https://www.youtube.com/watch?v=drIMO_Ud6X8

9 hours ago - Uploaded by UBS

Game theory is a kind of mathematics that lets us model the rules of the game. But what happens when people ...

Market design - Alvin E. Roth - Nobel Perspectives - YouTube

▶ 3:37

www.youtube.com/watch?v=1AEUAwa_fmg

9 hours ago - Uploaded by UBS

... we make are situated in a big world. Nobel-Prize winner in Economic Science Alvin E. Roth talks market ...

Match-making - Alvin E. Roth - Nobel Perspectives - YouTube

▶ 1:48

www.youtube.com/watch?v=nsIAtndNc5Q

9 hours ago - Uploaded by UBS

God created the world in six days, but what has he been doing since then? He's been making matches. Watch ...

Experiments - Alvin E. Roth - Nobel Perspectives - YouTube

▶ 4:22

www.youtube.com/watch?v=6LWn91wvjrY

9 hours ago - Uploaded by UBS

... can economic theory be applied to help us solve problems in the British health service? Watch Nobel-Prize ...

Human interaction - Alvin E. Roth - Nobel Perspectives ...

▶ 0:33

www.youtube.com/watch?v=YF9Ib0WlBaE

9 hours ago - Uploaded by UBS

'People talk all the time, we transact, we compete. Market design is about understanding and facilitating that ...


Building bridges - Alvin E. Roth - Nobel Perspectives ...
▶ 0:35
www.youtube.com/watch?v=yTSUjWq79zQ
9 hours ago - Uploaded by UBS
'We've learned to build bridges better, and that's also the case with markets' Watch Nobel Laureate Alvin ...


Paul Donovan on Alvin E. Roth - Nobel Perspectives ...
▶ 4:07
www.youtube.com/watch?v=5cK668w5HOs
9 hours ago - Uploaded by UBS
UBS Global Economist Paul Donovan explains the allure ofAlvin E. Roth's approach to game theory, and ...


Tim Harford on Alvin E. Roth - Nobel Perpectives - YouTube
▶ 2:51
www.youtube.com/watch?v=fVFCGLYmyZE
9 hours ago - Uploaded by UBS
The Financial Times columnist and author of The Undercover Economist explains how Alvin E. Roth's ...

Stanford celebrates Itai Ashlagi

Itai Ashlagi has joined the Management Science and Engineering Department at Stanford, and the Engineering School celebrates his arrival here: New Faculty Member: Professor Itai Ashlagi Plays Matchmaker for Patients, Schools, New Doctors

Christine Exley is an EconomicRockstar: on the Economics of Volunteering, Market Failure in the Homeless Dog Market and Wagaroo

The Economic Rockstar podcast interviews  Christine Exley on the Economics of Volunteering, Market Failure in the Homeless Dog Market and Wagaroo

Here is Christine's web page: https://sites.google.com/site/clexley/

The magic of the market - Nobel Perspectives [Teaser--30 second video]

UBS has commissioned a set of video interviews with Nobel laureates, and this 30 second "teaser" is apparently an indicator that their interview with me will soon appear...
It is part of a long conversation they filmed between me and Paul Milgrom.

Incentives for organ donation: one brick at a time

Right now there is an active discussion of providing incentives for organ donation (see yesterday's post). But providing incentives is hard to do: even recognition is hard. I don't know whether to clap or cry at this effort: Organ donors to get an engraved brick at Lafayette General Medical Center

A Cost-Benefit Analysis of Government Compensation of Kidney Donors by Held, McCormick, Ojo, and Roberts

Just out in the American Journal of Transplantation: A Cost-Benefit Analysis of Government Compensation of Kidney Donors by Held, McCormick, Ojo, and  Roberts

"From 5000 to 10 000 kidney patients die prematurely in the United States each year, and about 100,000 more suffer the debilitating effects of dialysis, because of a shortage of transplant kidneys. To reduce this shortage,many advocate having the government compensate kidney donors. This paper presents a comprehensive cost-benefit analysis of such a change. It considers not only the substantial savings to society because kidney recipients would no longer need expensive dialysis treatments—$1.45 million per kidney recipient—but also estimates the monetary value of the longer and healthier lives that kidney recipients enjoy—about $1.3 million per recipient. These numbers dwarf the proposed $45 000-per-kidney compensation that might be needed to end the kidney shortage and eliminate the kidney transplant waiting list. From the viewpoint of society, the net benefit from saving thousands of lives each year and reducing the suffering of 100 000 more receiving dialysis would be about $46 billion per year, with the benefits exceeding the costs by a factor of 3. In addition, it would save taxpayers about $12 billion each year."

An html version of the article along with its supplementary materials is here: http://onlinelibrary.wiley.com/doi/10.1111/ajt.13490/suppinfo

Climate negotiation design

Axel Ockenfels writes:

David MacKay, Peter Cramton, Steven Stoft and I published a comment on climate negotiation design today in Nature (my stay in Stanford way extremely useful in this respect ;-). 

Here is a link: http://www.nature.com/news/price-carbon-i-will-if-you-will-1.18538

And here is a link to an ebook that we compiled, which has lots of background material by us and others, including Tirole, Stiglitz, Weitzman, and Nordhaus: http://carbon-price.com/

There have been a couple of newspaper articles on that (and more are coming), too, such as:

http://www.bbc.com/news/science-environment-34489266
["If you know a carbon price will apply to all other countries as well as you, it now comes in your self interest to advocate a high carbon price" David MacKay, University of Cambridge]

http://www.faz.net/aktuell/wirtschaft/energiepolitik/oekonomen-sehen-den-klimagipfel-in-paris-zum-scheitern-verurteilt-13851185.html

http://www.sueddeutsche.de/wirtschaft/klimagipfel-scheitern-mit-ansage-1.2692393"
*****************

The Nature comment comes with a picture to illustrate the problem of all pulling together...

Price carbon — I will if you will  David J. C. MacKay, Peter Cramton, Axel Ockenfels& Steven Stoft ,12 October 2015

"Negotiations at the United Nations climate summit in Paris this December will adopt a 'pledge and review' approach to cutting global carbon emissions. Countries will promise to reduce their emissions by amounts that will be revised later. The narrative is that this will “enable an upward spiral of ambition over time”1. History and the science of cooperation predict that quite the opposite will happen.

...

"Success requires a common commitment, not a patchwork of individual ones. Negotiations need to be designed to realign self-interests and promote cooperation. A common commitment can assure participants that others will match their efforts and not free-ride. A strategy of “I will if you will” stabilizes higher levels of cooperation. It is the most robust pattern of cooperation seen in laboratory and field studies of situations open to free-riding"

...

"We, and others, propose an alternative: a global carbon-price commitment7. Each country would commit to place charges on carbon emissions from fossil-fuel use (by taxes or cap-and-trade schemes, for example) sufficient to match an agreed global price, which could be set by voting — by a super-majority rule that would produce a coalition of the willing.

"A uniform carbon price is widely accepted as the most cost-effective way to curb emissions. Carbon pricing is flexible, allowing fossil taxes, cap-and-trade, hybrid schemes and other national policies to be used (unlike a global carbon tax). All that is required of a country is that its average carbon price — cost per unit of greenhouse gas emitted — be at least as high as the agreed global carbon price.

"Unlike global cap-and-trade, carbon pricing allows countries to keep all carbon revenues, eliminating the risk of needing to buy expensive credits from a rival country. Taxes need not rise if a nation performs a green tax shift — reducing taxes on good things such as employment by charging for pollution. Shifting taxes from good things to bad things could mean there is no net social cost to pricing carbon, even before counting climate benefits"

Centennial Lecture at U of I College of Business: Rigor & Relevance

I'm returning to Champaign Urbana, to help celebrate the centennial of the University of Illinois College of Business, where I started my academic career. When I was there (1974-82), it was called the College of Commerce And Business Administration, and I had a joint appointment in its Departments of Business Administration and of Economics (which is now in the College of Liberal Arts and Sciences).   It was a great eight years, which got me going in many ways.

I didn't choose the title of the lecture, nor the announcement, which presents me with a bit of a challenge:

Centennial Lecture: Rigor & Relevance, Friday October 16.

"Alvin Roth is a former member of the College of Business who won the Nobel Memorial Prize in Economic Sciences in 2012. Dr. Roth has successfully bridged economic theory and practice by designing efficient and equitable systems of matching markets. His work has been applied to design school choice procedures for public schools in Boston and New York City, kidney transplant exchange protocols, and clearinghouses for a variety of healthcare professions.

In honor of the College’s centennial anniversary, he is returning to Illinois to present this special lecture that should provide excellent insight into his research. How do engaged scholars such as Roth ensure that the right questions have been asked? How can researchers collaborate with practitioners to successfully co-produce significant knowledge? What specific actions are necessary to ensure effective knowledge transfer from academia to the practitioner world? Join us for this once-in-a-lifetime opportunity to learn from one of the brightest economist of our time. "


I plan to talk about how the theoretical work that I began when I came to Illinois grew into two streams of work that later led to my involvement in the design of labor market clearinghouses for doctors, and to the development of kidney exchange into what is now a standard form of transplantation.

Guru Madhavan on economists and engineers

Guru Madhavan has a new book, Applied Minds: How Engineers Think.
I liked it enough to write a blurb for the cover:
“Guru Madhavan not only dispels any hint of darkness concerning how engineers think, his delightful book explains how the designed world of machines and systems interacts with the social world in which we use the tools that engineers give us.” (Alvin Roth, winner of the Nobel Prize in Economics and author of Who Gets What―and Why)"

Now he's published an article in Wired, whose headline conceals how well he thinks engineering and economics go together. I'm guessing he didn't write the headline. Somewhat misleadingly it's called Irrational humans need engineers, not economists.  In fact, he's enthusiastic about market design as the engineering part of economics.

He concludes
"Through an increased reliance on engineers -- or better yet, rethinking economics using the principles of engineering - policymakers can develop more effective solutions to social challenges."

The black market for kidneys in South Asia

It sounds like you can buy a kidney in India, and have it transplanted in Sri Lanka. But it isn't clear how large the market is compared to the vast worldwide demand or even to the number of legal kidney  transplants around the world (in the US we have about 17,000) a year). When I say it isn't clear, I mean that the story is based mostly on anecdotal information from market participants...
However I can supply an additional anecdote about social media: almost every morning as I get ready to publish my blog post for the day, I delete spam "comments" on previous posts about kidneys, offering phone numbers to call if you want to sell yours...

Al Jazeera has the story:
Need a kidney? Inside the world’s biggest organ market
The illicit kidney trade in South Asia has exploded as brokers use social media to find donors.

""If you have the money and want it fast, you come here. I will find you a donor and you can go home with a new kidney in a month," Vikas told Al Jazeera, speaking on the condition that his real name not be published.

"According to the World Health Organisation (WHO), South Asia is now the leading transplant tourism hub globally, with India among the top kidney exporters. Each year more than 2,000 Indians sell their kidneys, with many of them going to foreigners.

"This gaping hole between demand and the legal supply of kidneys is being filled by what may be the world's biggest black market for organs, which criss-crosses India, Nepal, Bangladesh, Pakistan, Sri Lanka and Iran.

"However, in recent years, Sri Lanka's capital Colombo has become the new nerve centre of this network, where most transplant operations are carried out. In recent years, Sri Lanka has attracted kidney buyers from as far afield as Israel and the United States.

"This development came after India tightened its rules on organ exchanges in 2008, following the arrest of a "kidney kingpin" running one of the world's largest kidney trafficking rings. Many donors are also taken to Iran, the only country in the world where selling kidneys is legal, though not to foreigners.

"Anurag, one of the top names in brokering circles, told Al Jazeera that many agents in India and Bangladesh were working at the behest of individual doctors or hospitals based in Colombo who offered "complete packages" to foreign recipients, with prices ranging from $53,000 to $122,000.

"It covers everything - hospital bill, doctor's fee, payment to the donor, his travel and accommodation cost, and, of course, broker's commission. This is the best way because it saves everybody time and hassle," Anurag - who also wanted his real name withheld to avoid trouble - told Al Jazeera from Sri Lanka.

"Although the illicit racket has flourished since the 1990s, social media has catapulted the trade into a new dimension. Brokers like Vikas and Aadarsh are openly lurking on dozens of Facebook pages fashioned as kidney and transplant support groups.

HT: Mohammad Akbarpour

He has new papers on school choice

Yingua He that is, and coauthors Gabrielle Fack and Julien Grenet, and Antonio Miralles, Marek Pycia and Jianye Yan.

You can find them at the links below.

• "Beyond Truth-Telling: Preference Estimation with Centralized School Choice" 2015. NEW with Gabrielle Fack &Julien Grenet

Abstract: We propose novel approaches and tests for estimating student preferences with data from school choice mechanisms, e.g., the Gale-Shapley Deferred Acceptance. Without requiring truth-telling to be the unique equilibrium, we show the matching is (asymptotically) stable, or justified-envy-free, implying that everyone is assigned to her favorite school among those she is qualified for ex post. Having validated the approaches and tests in simulations, we apply them to Parisian data and reject truth-telling but not stability. The estimates are then used to evaluate the sorting and welfare effects of the admission criteria that determine how schools rank students in centralized mechanisms.

• "A Pseudo-Market Approach to Allocation with Priorities" 2015. NEW with Antonio Miralles, Marek Pycia, &Jianye Yan

Abstract: We propose a pseudo-market mechanism for no-transfer allocation of indivisible objects that honors priorities such as those in school choice. Agents are given token money, face priority-specific prices, and buy utility-maximizing assignments. The mechanism is asymptotically incentive compatible, and the resulting assignments are fair and constrained Pareto efficient. Hylland and Zeckhauser's (1979) position-allocation problem is a special case of our framework, and our results on incentives and fairness are also new in their classical setting.