Market Design

Sunday, March 7, 2021

Deferred Acceptance with Compensation Chains by Piotr Dworzak

Here's an interesting look at deferred acceptance algorithms, published online early in Operations Research

Deferred Acceptance with Compensation Chains by Piotr Dworczak

Published Online:18 Feb 2021https://doi.org/10.1287/opre.2020.2042

Abstract: I introduce a class of algorithms called deferred acceptance with compensation chains (DACC). DACC algorithms generalize the Gale–Shapley algorithm by allowing both sides of the market to make offers. The main result is a characterization of the set of stable matchings: a matching is stable if and only if it is the outcome of a DACC algorithm. The proof of convergence of DACC algorithms uses a novel technique based on a construction of a potential function.

Saturday, March 6, 2021

Tom Schelling (who passed away in 2016) gets a Memorial Minute at Harvard

From the Harvard Gazette, March 3, 2021

Thomas Crombie Schelling, 95. Memorial Minute — Faculty of Arts and Sciences

submitted by Eric S. Maskin, Amartya Sen, Richard J. Zeckhauser, Benjamin M. Friedman

"Thomas C. Schelling taught at Harvard for 32 years, in the Department of Economics and in the Kennedy School. More than any other thinker, Schelling influenced the West’s conceptual approach to the nuclear dangers after World War II. He was an outstanding economist, but ordinary disciplinary boundaries could not contain his fertile mind. Schelling’s contributions interwove theoretical understanding and policy-relevant applications. He laid bare the underpinnings of such problems as nuclear deterrence, racial segregation, smoking, and climate change. Schelling eschewed mathematical expression; he wrote in plain but elegant English. He often developed ideas using examples from everyday life and then applied them to global issues. For instance, he illuminated the architecture of threats and promises first within the family and then in international affairs.

...

"The Nobel Prize committee wrote that Schelling’s insights proved “to be of great relevance for conflict resolution and efforts to avoid war,” and, unsurprisingly, he devoted his Nobel lecture to what he called the “nuclear taboo.”

"As the threat of nuclear war receded, Schelling applied his characteristic approach to other big problems. He analyzed the damage, to both the individual and society, of smoking and other personal addictions. He anticipated future work in behavioral economics and psychology with his working assumption that often what appears to be irrational behavior of an individual is instead a reflection of different aspects of that individual’s self. He probed the problem of racial segregation and showed how easily it can arise even if people have only a tiny preference for their own race. In his final decades, Schelling’s principal focus was climate change. That concern was not new for him; in 1980 he chaired the Ad Hoc Study Panel on Economic and Social Aspects of Carbon Dioxide Increase, under President Carter."

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Microstructure of Macro Behavior

Tuesday, December 13, 2016

Tom Schelling (1921-2016)

Friday, March 5, 2021

The costs of applying for financial aid for college

The Chronicle of Higher Education has a surprisingly moving long story about the fact that applying for financial aid is not only time consuming, difficult and even expensive for the people who need it most, but can also be emotionally costly, especially for students from broken families, since the form requires input from both parents.

The Most Onerous Form in College Admissions. The Fafsa is tough, but the CSS Profile is grueling. There’s a human cost. By Eric Hoover

"The most onerous form in admissions bores into the bones of your existence. Each year it sows confusion and multiplies misery among those seeking financial aid from many of the nation’s wealthiest colleges. It’s called the College Scholarship Service Profile, or CSS Profile, for short. Some students call it burdensome, invasive, evil.

...

"The CSS Profile is more detailed than the Free Application for Federal Student Aid, or Fafsa. The latter form, which families use to get government grants and loans, has long been seen as a barrier to college access. But if the Fafsa is a 100 yards of difficulty, the CSS Profile is a mile.

"And unlike the federal form, it’s not free for everyone. The College Board provides fee waivers for some low-income students; otherwise families pay $25 to submit the form to one college, then $16 a pop for each additional one.

...

"Just so we’re clear, the application — used by more than 400,000 students annually — isn’t evil or ill-intentioned. It helps colleges and scholarship organizations allot more than $9 billion a year to students, often unlocking doors to a new life.

...

"This is perhaps the most important thing to know about the CSS Profile: Teenagers, especially in lower-income families, are often the ones who fill out the form. They’re the ones digging up tax forms and asking reluctant parents for their Social Security number. They’re the ones being asked to list “Social Security benefits received for all family members, except any who will be enrolled in college in 2021-22, that were not reported on a tax return,” and “Alimony Received (including, but not limited to, amounts reported on a tax return),” and to answer this: “Is any person in your family the beneficiary of a trust?”

...

"The heaviest weight falls on students who don’t live in a nuclear family. Students from single-parent homes. Students whose parents had ugly separations. Students with a parent who’s abusive or imprisoned or nowhere to be found. Whose parents are dead. Who live with siblings or grandparents or legal guardians or foster parents — or with no one.

"There are many reasons you might need to request a waiver for the CSS Profile’s noncustodial-parent requirement. One college counselor calls the process “the worst and most demeaning thing I’ve ever seen.”

...

"Though a majority of institutions that use the CSS Profile require noncustodial parents to complete their own form, students who have no contact with that parent can ask colleges to waive the requirement. They do so by completing the College Board’s official waiver-request form, which says that institutions typically consider the requests in cases of “documented abuse,” legal orders limiting the parent’s contact with the child, or “no contact or support ever received from the noncustodial parent.” Colleges might ask for documentation, such as court documents or legal orders.

...

"Each year, 22 percent of first-time domestic students using the CSS Profile get fee waivers, according to the College Board. Orphans and wards of the court under 24 get them, as do students receiving SAT fee waivers. Others qualify based on their parental income and family size (a family of four would qualify with an income of $45,000 or less). An applicant’s eligibility is determined automatically by his or her responses on the CSS Profile — meaning they don’t know if they will get a waiver until they complete the form.

"Let’s do some quick math. If 22 percent of CSS Profile users get fee waivers, that means 78 percent don’t. That’s approximately 312,000 students who pay the College Board about $7.8 million a year just by completing the $25 form and sending it to one college."

Thursday, March 4, 2021

Vaccine supply and delivery in Germany: I'm interviewed in Zeit

Here's an interview in the German newspaper Zeit, in which I was asked in early February about the vaccine rollout here and there. (Google translate is pretty readable, although some of the Q&A is a bit garbled by the translation from English to German and re-translation back into English...)

"Die Welt kann es sich leisten, einiges zu bezahlen" Alvin Roth weiß, wie man begehrte Güter effizient verteilt. Er hat den Nobelpreis dafür bekommen. Ein Gespräch über knappen Impfstoff und wie er vermehrt werden kann. Interview: Lisa Nienhaus

Google Translate: "The world can afford to pay a lot" Alvin Roth knows how to efficiently distribute desirable goods. He got the Nobel Prize for it. A conversation about scarce vaccine and how it can be propagated. Interview: Lisa Nienhaus February 15, 2021,

The interview starts off talking about congestion, and line jumping, and the tradeoffs between speed and fairness (and how it's really costly to allow some vaccine to expire unused in the name of fairness). It then turns to shortages of vaccine in the near term:

ZEIT ONLINE: Attempts are being made to build new production facilities. But in Germany we are - to be honest - pretty late.

Roth: But now is not the time to give up. Everything we build now may help us in August. Even if Germany is running late, there is still time to expand production facilities. Especially since these systems would certainly not have to be destroyed after Covid. Being able to produce mRNA vaccines oneself is also a good thing in the future. Vaccine production is not that complicated. You can build production facilities anywhere. And you should too.

ZEIT ONLINE: It's not happening on a large scale yet. What to do?

Roth: Laws are really useful for that. Pfizer / BioNTech and Moderna could be forced to license the production technology to other German pharmaceutical companies.

ZEIT ONLINE: That sounds radical.

Roth: I only think it's logical. If you had a pharmaceutical company, you'd think, "I'm paid by the dose. I've got enough capacity to ship to the whole world in the next year and a half. Why should I hurry?" There is no need to set up production facilities just to supply the world in six months instead of 18. It doesn't make any difference from a business perspective. But for the German or American government, these two options are by no means equivalent. It is important that we vaccinate quickly. We need a lot more production capacity than the pharmaceutical companies think it makes sense.

ZEIT ONLINE: Economists rarely suggest such a strong market intervention. And that also applies to companies that we must first be grateful to because they show us a way out of lockdown.

Roth: It's a global pandemic. It is economically necessary to think about how to avert the damage to the economy. But of course you have to pay the manufacturers. Many forget that.

ZEIT ONLINE: How fair the companies think that probably depends on how much you pay them.

Roth: Yes. But the world can afford to pay a lot. Because the world economy is currently largely at a standstill. We have a multi-trillion dollar economy. Paying a billion to save a trillion is good business.

ZEIT ONLINE: Why is that not happening so far?

Roth: The pharmaceutical companies themselves don't think that way at the moment. But we need the vaccine now. And it's very expensive for the world to shut down its economy like that. If you lose a few percentage points of GDP growth in Germany, that's a huge number. And there is almost no amount to pay to license the vaccine that is not worth it.

Wednesday, March 3, 2021

Anger at vaccine line jumping

There is some tension between getting populations vaccinated quickly and ensuring that priorities for who gets vaccinated first are carefully followed. In some places we have seen the costs of adhering too strictly to priorities when enough high priority people are hard to find quickly. In other places we see the costs of ignoring priorities.

Here's a NY Times story on corruption in South America (followed by a Guardian story about the difficulty of stopping tech-savvy Californians from grabbing appointments meant for underserved minorities):

‘V.I.P. Immunization’ for the Powerful and Their Cronies Rattles South America. A wave of corruption scandals is exposing how the powerful and well-connected in South America jumped the line to get vaccines early. Public dismay is turning into anger. By Mitra Taj, Anatoly Kurmanaev, Manuela Andreoni and Daniel Politi

"The hope brought by the arrival of the first vaccines in South America is hardening into anger as inoculation campaigns have spiraled into scandal, cronyism and corruption, rocking national governments and sapping trust in the political establishment.

"Four ministers in Peru, Argentina and Ecuador have resigned this month or are being investigated on suspicion of receiving or providing preferential access to scarce coronavirus shots. Prosecutors in those countries, and in Brazil, are examining thousands more accusations of irregularities in inoculation drives, most of them involving local politicians and their families cutting in line.

...

“People find it much more difficult to tolerate corruption when health is at stake,” said Mariel Fornoni, a pollster in Buenos Aires.

The brazen nature of some of the scandals — which mirror similar affairs in Lebanon, Spain and the Philippines — has outraged the region.

...

"Earlier this month, the doctor conducting Peru’s first vaccine trial acknowledged inoculating nearly 250 politicians, notables and their relatives, as well as university administrators, interns and others, with undeclared extra doses. Some had received three doses, according to the trial’s director, Dr. Germán Málaga, in an attempt to maximize their immunity."

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And here's the Guardian, on California:

California vaccine sites see misuse of codes meant to prioritize Black and Latino residents by Vivian Ho

"Access codes meant to give Californians of color priority access to Covid-19 vaccine slots have been getting passed around among other residents in the state, allowing some to cut the line and get appointments meant for underserved Black and Latino residents.

Misuse of these codes was reported at vaccine sites in Los Angeles and the Bay Area, said Brian Ferguson, spokesperson for the California office of emergency services, to the Guardian.

"The codes were one of the tools devised by California leaders to address inequities in vaccine distribution in the state. They were given out to leaders and non-profits in the Black and Latino communities in LA and the Bay Area to administer to eligible individuals...

"Instead, the codes ended up passed on by text message and email, oftentimes with misinformation. “My daughter says that the Oakland Coliseum needs to fill up appointment slots in the next few days to prevent spoilage of excess vaccines!” read an email that Oakland resident Jhumpa Bhattacharya received from a friend on Monday. “If you are interested in getting a vaccine before this Wednesday, the link and access code are pasted below."

...

"State officials thought that by handing out vaccine access codes through community leaders, they would bridge any cultural or language barriers while also addressing the issue of the digital divide by giving these eligible individuals special access to the website, Ferguson said. “We don’t want people to be able to get appointments based on who has the fastest internet connection,” he said.

"Since learning of the misuse, the state will begin issuing individualized codes rather than group codes next week. In addition to these codes, the state has been setting up mobile vaccination clinics in these specific communities in hopes of reaching these underserved residents."

Tuesday, March 2, 2021

Electricity supply and electricity politics in Texas--an interview with Peter Cramton

The veteran market designer Peter Cramton was among the members of the Board of Directors of the Electric Reliability Council of Texas (ERCOT) who live outside of Texas and were asked to resign last week, following the winter storm that left many Texans without power, or with unexpected, very high electricity bills. ERCOT is the independent system operator, charged with running the network minute to minute.

He's interviewed by Texas Public Radio:

Former ERCOT Board Member Says ‘Toxic Politics’ Spurred Resignations After Texas Grid Failure Texas Public Radio | By Dominic Anthony Walsh

"Peter Cramton is an economics professor at the University of Cologne and the University of Maryland. He has expertise and experience in complex market designs, including electricity and radio spectrum markets. He served as an “independent director” on the board of the Electric Reliability Council of Texas (ERCOT) from 2015 until last week.

"At his final board meeting, he said, “ERCOT was flying a 747. It had not one, but two engines experience catastrophic failure. (ERCOT) then flew the damaged plane for 103 hours before safely landing in the Hudson. In my mind, the men and women in the ERCOT control room are heroes.”

Here are some bits of the interview:

Dominic Walsh: Could you help me understand your role as an “independent director?” And does it make sense for some of the independent directors to live out of state? There's a lot of controversy around that.

Peter Cramton: What’s unusual is that we have a hybrid board that consists of “affiliated directors” that are affiliated with a particular stakeholder group. There's complete transparency on that, who they're affiliated with. And it is completely balanced. There are four affiliated directors representing the supply side, and there are four affiliated directors representing the demand side. So those are the two sides of almost every market — supply and demand, production and consumption — and there is a perfect balance. Then there's the “independent directors.” There's five independent directors, and the independent directors can have no association with either side of the market. The challenge with independent directors is: It's hard to find people that have the technical expertise, and (are) independent of the market participants. Now, here's the problem: So, one natural thing is you could say, "Well, you know, it's important that the directors live in Texas." Well, then you’d just be imposing another constraint. So, if we say, "OK, now you have to be independent from all market participants. You have to live in Texas. And you have to be an expert in a highly technical industry…" The reality is it's going to be very difficult to find people that fill all of these.

Walsh: So far, you've described a bunch of advocates for various sectors, and a bunch of experts. It sounds slightly more technocratic than democratic. So, where is the accountability to the public — the democratic element of the board?

Cramton: Absolutely. So, it's critically important. And that is the Public Utility Commission of Texas. So, there's a Public Utility Commission that consists of three commissioners, and they provide that oversight. And in fact, that oversight is incredibly important. So, for example, it's the Public Utility Commission that is responsible for the more delicate decisions that are made in the market. And the Public Utility Commission has oversight over all the market rules. What about a renegade Public Utility Commission? You know, who's watching them? Well, who's watching them: that's the legislature and the governor. The commissioners serve largely for the governor and legislature. And if they're doing something that the governor, the legislature does not like, then the governor and legislature can take action to replace the commissioners or whatever other action they want. So that's the continued hierarchy in this governance structure, and that's all within Texas.

Walsh: Why did you resign? It sounds like you're a big fan of ERCOT and their mission. It sounds like you think ERCOT performed well throughout this. Why did you and other members of the board ultimately resign?

Crampton: We resigned, in short, because the politics are toxic right now. The governor and legislature suggested that we resign. And we basically took him up on that. And so that is the reason that we resigned. So, I think the best way to put it is: We were on the boat. And we were — we didn't leave the sinking ship. We were thrown off the boat. But we're all good swimmers, so I'm sure we'll all do just fine. And quite frankly, because of the toxic politics, we're not the ones that are — for me, I'm a professor. I'm an expert in electricity market design. And I'm not an expert in delicate politics.

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Here's a story from the Texas Monthly on the Texas power grid that also discusses some of the political players:

The Texas Blackout Is the Story of a Disaster Foretold. Those in charge of Texas’s deregulated power sector were warned again and again that the electric grid was vulnerable. by Jeffrey Ball

Monday, March 1, 2021

Compensating challenge vaccine trial participants: further discussion in the American Journal of Bioethics

The AJB invites commentaries on its target articles, and the comments on our article on payments in human infection challenge trials have now appeared. (If I've done this right, you can read them by clicking on the links below.) This is from The American Journal of Bioethics, Volume 21, Issue 3 (2021)

Our target article points out that while much of the medical ethics literature focuses on the claim that payments can subject potential participants, particularly poor people, to undue influence or coercion by being too large, there can be a countervailing concern that payments that are too small can be exploitative, and that this might often be the greater ethical concern.

The commentaries are all brief, but there are nine of them, so let me recommend to my regular market design readers that two that might be rewarding to begin with are those by Julian Savulescu, and by Seán O’Neill McPartlin & Josh Morrison.

Target Article