Friday, April 30, 2021

Not all excess mortality during the pandemic comes from infection: overdose deaths in Cook County

 A recent paper in JAMA reminds us that not all excess mortality during the pandemic is due to infection with Covid-19:

Mason M, Arukumar P, Feinglass J. The Pandemic Stay-at-Home Order and Opioid-Involved Overdose Fatalities. JAMA. Published online April 23, 2021. doi:10.1001/jama.2021.6700

"A total of 4283 opioid overdose fatalities occurred in Cook County from January 2018-December 2020, ranging from 12 to 53 weekly (eFigure in the Supplement). There was a mean of 23.0 deaths per week during the initial 100-week period (2018-2019), with little apparent seasonal variation. During the subsequent 15 weeks beginning in December 2019, deaths increased to a mean of 35.1 per week, followed by an even more pronounced increase during the 11-week stay-at-home order: 44.1 mean weekly deaths. In the 29 weeks after the stay-at-home order was lifted mean weekly deaths sharply declined and then began to increase toward the end of the period, at 32.7 deaths. Although deaths have declined below the peak weekly numbers seen during the stay-at-home period, opioid overdose deaths following the stay-at-home period remain elevated above pre-2020 levels."

Thursday, April 29, 2021

NYC to stop prosecuting prostitutes (but will continue to prosecute their customers)

 NYC will stop prosecuting prostitution, but will continue to prosecute the customers of prostitutes, and pimps.

The NY Times has the story:

Manhattan to Stop Prosecuting Prostitution, Part of Nationwide Shift.    By Jonah E. Bromwich

"The Manhattan district attorney’s office announced Wednesday that it would no longer prosecute prostitution and unlicensed massage, putting the weight of one of the most high-profile law enforcement offices in the United States behind the growing movement to change the criminal justice system’s approach to sex work.

"The district attorney, Cyrus R. Vance Jr., asked a judge on Wednesday morning to dismiss 914 open cases involving prostitution and unlicensed massage, along with 5,080 cases in which the charge was loitering for the purposes of prostitution.

"The law that made the latter charge a crime, which had become known as the “walking while trans” law, was repealed by New York State in February.


"Criminally prosecuting prostitution does not make us safer, and too often, achieves the opposite result by further marginalizing vulnerable New Yorkers,” Mr. Vance said in a statement.

"The office will continue to prosecute other crimes related to prostitution, including patronizing sex workers, promoting prostitution and sex trafficking, and said that its policy would not stop it from bringing other charges that stem from prostitution-related arrests.

"That means, in effect, that the office will continue to prosecute pimps and sex traffickers, as well as people who pay for sex, continuing to fight those who exploit or otherwise profit from prostitution without punishing the people who for decades have borne the brunt of law enforcement’s attention."

Wednesday, April 28, 2021

Selective NYC high schools aren't as hard to get into as is sometimes reported: Sam Abrams in the Columbia Journalism Review

 In the Columbia Journalism Review, Sam Abrams explains how data from NYC's deferred acceptance algorithm for assigning students to schools is often misunderstood in the press, when it comes to reporting on how selective the schools are.

Getting Education Data Right: The Case of High School Admissions  By Samuel E. Abrams

"The trouble with the story about high school admissions begins with official data. The admissions numbers in the annual high school directories published by New York City’s Department of Education are indeed alarming. Eight consecutive schools in the 2019 directory, for example, exhibited daunting odds: Bard High School Early College, 30 applicants per seat; Baruch College Campus High School, 44; Beacon High School, 19; Business of Sports School (BOSS), 13; Central Park East High School, 37; Chelsea Career and Technical Education High School, 14; City College Academy of the Arts, 22; and The Clinton School, 21. These odds translate into acceptance rates ranging from 2.3 percent, in the case of Baruch, to 7.7 percent, in the case of BOSS. 

"But these students are not applicants in the conventional sense. They are students who rank a school by order of preference as one of up to 12 with which they would like to match. This process—introduced in 2004 and derived from the National Resident Matching Program for doctors introduced in 1952—employs an algorithm allowing only one match. Accordingly, if every eighth-grader in New York City exercised his or her right to list 12 schools, each school, on average, could in turn accept only one of 12 students, or 8.3 percent of applicants.


"I began encountering this reporting problem in 2005, when the Times published an article on then-Mayor Michael Bloomberg’s plans to create several new high schools to address the surplus demand for seats in exam and screened schools. The Times reported that Beacon had 6,000 applicants for 250 seats the previous year, meaning an acceptance rate of 4.2 percent.

"As a teacher at Beacon at the time, I knew the admissions process from the inside and emailed a correction to the paper: 6,000 students ranked Beacon as one of up to 12 schools in which they were interested; about 1,800 students submitted the requisite portfolio of their best work and visited the school for the mandated interview; and approximately 500 offers were made to fill 250 seats. This meant an acceptance rate of about 28 percent if all 1,800 applicants ranked Beacon first, which is highly improbable, given that approximately 50 percent of applicants to Beacon today who fulfill application requirements rank the school first. But that correction went nowhere, and I resigned myself to explaining the numbers to anxious parents fretting that their children had no chance of getting into Beacon given what they had read in the Times.


"Following the 2017 article about 10 of the city’s high schools being more selective than Yale, I wrote a letter to the Times. As that letter went unacknowledged and as the newspaper did not run another letter to elucidate the process, I published a critique on the Web site of a research center I run at Teachers College, Columbia University. That critique led to an article published by Chalkbeat and another by Phi Delta Kappan, which interviewed Alvin Roth, a professor at Stanford who shared the Nobel Prize in economics in 2012 for work decades earlier on market design and who, with two other economists, Atila Abdulkadiroglu and Parag Pathak, developed the algorithm used by the DOE. Roth explained that the Times had indeed greatly exaggerated the number of applicants because the algorithm pulled students from the applicant pool once they were matched. “If I applied to you as my seventh choice, and I got accepted by my first choice, I wasn’t rejected by you,” Roth said. “You never saw me.”

"With a matching algorithm, the closest one can truly get to an acceptance rate is a match rate through adding the number of students who matched with a particular school to the number of students who matched with a school they ranked lower than that school and then dividing the number of matches by that sum.


"What is nevertheless certain is that the algorithm developed by Roth with Abdulkadiroglu and Pathak has significantly streamlined the enrollment process in New York. The three economists developed the algorithm, they wrote in a 2005 article published in the American Economic Review, to “relieve the congestion of the previous offer/acceptance/wait-list process” that conferred “some students multiple offers” and “multiple students … no offers.:

Tuesday, April 27, 2021

Cannabis in Canada

It's not so easy for a heavily regulated legal market to compete with an unregulated black market.  The NY Times has the story:

After ‘Green Rush,’ Canada’s Legal Pot Suppliers Are Stumbling. Most marijuana producers in Canada are still reporting staggering losses two and a half years after legalization.  By Ian Austen

"When Prime Minister Justin Trudeau’s government’s legalized marijuana in 2018, a primary goal was to create a more equitable justice system — not a major new business sector.

"Investors, however, thought otherwise, and in the time leading up to legalization, a “green rush” swept the Toronto Stock Exchange. Money poured into companies starting up to service not only the Canadian market, but also eyeing other opportunities, particularly the U.S. market, where more states were embracing legalization.


"Even with a slight recovery propelled by the spreading legalization in the United States — New York legalized marijuana last month, and voters in four states backed legalization in November — one marijuana stock index is still down about 70 percent from its peak in 2018.

"Two and a half years after legalization, most marijuana producers in Canada are still reporting staggering losses.

"And a major new competitor is looming: Mexico’s lawmakers legalized recreational pot use last month. So the business climate for Canada’s growers could become even more challenging."

Monday, April 26, 2021

Cross border sales of cannabis between Oregon (legal) and Idaho (illegal)

 It's hard to effectively ban a transaction in one jurisdiction if it is legal just across the border.  The patchwork of marijuana laws in the U.S. makes this clear.

Politico has the story:

Border weed: How the hometown of tater tots became a cannabis capital. Ontario, Ore., has nine dispensaries for 11,000 residents. But most of their customers are coming from Idaho.  By NATALIE FERTIG

"Marijuana remains illegal in Idaho. In fact, it is one of only two states left in the nation that bans all forms of cannabis, including hemp and CBD products. But drive across the border into Oregon, and Idahoans can purchase every conceivable type of cannabis product, from THC infused artisan grape taffy to 1.5 gram pre-rolled joints.

"In the year and a half since Ontario began allowing weed sales, nine dispensaries have opened. It’s estimated that the city will generate $120 to $130 million in annual sales when the cannabis industry is fully up and running — that’s more than 10 percent of Oregon’s sales in 2020.


"Ontario is just one of dozens of border communities around the country that have been transformed into marijuana boom towns thanks to the country’s patchwork quilt of cannabis laws. Eighteen states now embrace full legalization, and all of them but California and Alaska share a border with at least one state where cannabis is illegal. Spokane, Wash., Sauget, Ill., Trinidad, Colo., and Great Barrington, Mass., are just a few towns where marijuana entrepreneurs have found fertile ground in these border regions between legal and non-legal states.


"People are willing to travel far for legal cannabis, even if illicit products are available in their hometown. Michelle drives four hours from southeastern Idaho every few months to visit Hotbox in Ontario. She said it’s worth the trip for the peace of mind.

“The problem is, you don't know what you're getting [in the illicit market],” said 46-year-old Michelle — who asked that her last name be left out because she planned to take products back across the border into Idaho. There’s less risk in consuming the Oregon products, she added, because you know “it didn't get transported in a gas tank.”

Sunday, April 25, 2021

The rise and fall of convalescent plasma as a treatment for Covid

 The NY Times follows the story:

The Covid-19 Plasma Boom Is Over. What Did We Learn From It?  The U.S. government invested $800 million in plasma when the country was desperate for Covid-19 treatments. A year later, the program has fizzled.  By Katie Thomas and Noah Weiland

"In those terrifying early months of the pandemic, the idea that antibody-rich plasma could save lives took on a life of its own before there was evidence that it worked. The Trump administration, buoyed by proponents at elite medical institutions, seized on plasma as a good-news story at a time when there weren’t many others. It awarded more than $800 million to entities involved in its collection and administration, and put Dr. Anthony S. Fauci’s face on billboards promoting the treatment.

"A coalition of companies and nonprofit groups, including the Mayo Clinic, Red Cross and Microsoft, mobilized to urge donations from people who had recovered from Covid-19, enlisting celebrities like Samuel L. Jackson and Dwayne Johnson, the actor known as the Rock. Volunteers, some dressed in superhero capes, showed up to blood banks in droves.


"But by the end of the year, good evidence for convalescent plasma had not materialized, prompting many prestigious medical centers to quietly abandon it. By February, with cases and hospitalizations dropping, demand dipped below what blood banks had stockpiled.


"All told, more than 722,000 units of plasma were distributed to hospitals thanks to the federal program, which ends this month."


There were also parallel private efforts that mobilized convalescent plasma donation through social media, and via faith based organizations.  I followed some of the science in a series of posts on plasma and plasma donation more generally.  I should note that, although convalescent plasma hasn't emerged as a treatment for Covid-19, it continues to have many very well documented life-saving uses.

Saturday, April 24, 2021

Dynamic Matching and Queueing Workshop at Columbia, April 29-30

 Columbia University's Market Design Initiative is sponsoring a

Dynamic Matching and Queueing Workshop on Thursday and Friday April 29-30. 

It's organized by Yeon-Koo Che (Columbia) and Olivier Tercieux (PSE), and is  a Zoom event, and Registration is required.


Thursday, April 29th
9:00 a.m. (EST): “Dynamic Model of Matching”
Pauline Corblet (Science Po), Jeremy Fox (Rice), Alfred Galichon (NYU)

10:00 a.m. (EST): “The Value of Time: Evidence from Auctioned Cab Rides”
Nicholas Buchholz (Princeton), Laura Doval (Columbia), Jakub Kastl (Princeton), Filip Matejka (CERGE), and Tobias Salz (MIT)

11:00 a.m. (EST): Coffee Break

11:15 a.m. (EST): “The Value of Excess Supply in Spatial Matching Markets”
Mohammad Akbarpour (Stanford), Yeganeh Alimohammadi (Stanford), Shengwu Li (Harvard), Amin Saberi (Stanford)

12:15 p.m. (EST): “Optimal Dynamic Allocation: Simplicity through Information Design”
Itai Ashlagi (Stanford), Faidra Monachou (Stanford), and Afshin Nikzad (USC)

1:15 PM (EST): Social Gathering

Friday, April 30th
9:00 a.m. (EST): “Stable Assignments and Search Frictions”
Stephan Lauermann (Bonn), Georg Nöldeke (Basel)

10:00 a.m. (EST): “Optimal Queue Design”
Yeon-Koo Che (Columbia) and Olivier Tercieux (PSE)

11:00 p.m. (EST) Coffee Break

11:15 p.m.(EST): “Matching in Dynamic Imbalanced Markets”
Itai Ashalgi (Stanford), Afshin Nikzad (USC), and Philipp Strack (Yale)

12:15 p.m. (EST): “Asymptotically Optimal Control of a Centralized Dynamic Matching Market with General Utilities” 
Jose Blanchet (Stanford), Martin Reiman (Columbia), Virag Shah (Uber), Larry Wein (Stanford), and Linjia Wu (Stanford)

1:15 p.m. (EST): Social Gathering

Friday, April 23, 2021

Challenge trial for Covid-19 reinfection, in Britain.

A second round of (controvesial) challenge trials is being conducted in England, this one designed to assess how susceptible are people to reinfection with Covid-19, after recovering from it once.

The WSJ has the story 

Covid-19 ‘Challenge Trial’ Will Purposely Reinfect Adults. Dozens of quarantined volunteers in U.K. to receive coronavirus in study focused on reinfection  By Jenny Strasburg

"University of Oxford scientists plan to reinfect dozens of adult volunteers with the coronavirus in the second U.K. clinical trial to study deliberate Covid-19 infection in quarantine—this time among people who have already recovered from the virus.

"Such “human challenge” trials are controversial because they involve intentionally infecting healthy humans, and the U.K. is the only country so far conducting them with Covid-19, researchers said.


"The first Covid-19 challenge study, led by Imperial College London infectious-disease researchers, started in March with a handful of volunteers isolated inside London’s Royal Free Hospital, part of the state-funded National Health Service. That study received a pledge of more than $45 million from the U.K. government.


"the U.S. and other countries have steered clear of purposely infecting healthy people with the coronavirus. Critics argue the risks aren’t justified, given the broad presence of naturally circulating virus and the success of vaccines already available.


"Challenge-trial proponents argue there is no substitute for the precision of controlled studies. They have been used for decades to study diseases including typhoid, malaria and tuberculosis and to develop vaccines. With Covid-19, Prof. McShane told journalists in a briefing last week, “We don’t know whether someone has not been infected because they haven’t been exposed or [because] they have protective immunity.” Controlling exposure will help with those questions, she said.


"Volunteers will be tracked for a year. They will be paid around £5,000, equivalent to $6,917, for their time in quarantine and for follow-ups, Prof. McShane said."


Related posts here: 

Thursday, April 22, 2021

Lawsuits to overturn bans on repugnant transactions: kidney sales and incest

 What to do if a transaction you would like to engage in is banned?  You could sue to overturn the ban.  Here are two recent news stories, both from the NY Post:

NJ man suing federal government for rights to sell his own organs  By Priscilla DeGregory

"John Bellocchio, 37, of Oakland filed the suit against United States Attorney General Merrick Garland in Manhattan federal court Thursday.

"He says in the suit that he struggled financially and looked into offloading some of his organs — perhaps a kidney — only to find out it’s illegal to make a buck on your body parts.

"Bellocchio, a career academic who now owns a business that helps connect people with service dogs, argues that the law contravenes his constitutional right to freedom of contract in determining what can be done with his own personal property — or, more specifically, his own body.

"There “is a broad misunderstanding among so many people that a well-regulated government-managed market for organs is something out of a bad Dickens novel, like Sweeney Todd-type stuff and it’s just not the case,” Bellocchio told The Post."

"A New Yorker who wants to marry their own adult offspring is suing to overturn laws barring the incestuous practice, calling it a matter of “individual autonomy.”

"The pining parent seeks to remain anonymous because their request is “an action that a large segment of society views as morally, socially and biologically repugnant,” according to court papers.

"Legal papers give only the barest picture of the would-be newlyweds, failing to identify their gender, ages, hometowns or the nature of their relationship.

“The proposed spouses are adults,” the filing says. “The proposed spouses are biological parent and child. The proposed spouses are unable to procreate together.”

"Incest is a third-degree felony under New York law, punishable by up to four years behind bars, and incestuous marriages are considered void, with the spouses facing a fine and up to six months in jail.
"In 2014, a state appeals court unanimously approved a case involving a woman married to her mother’s half-brother, noting the genetic relationship was the equivalent of first cousins. But even that ruling cited “the almost universal horror” with which a parent-child marriage is viewed."

HT: Kim Krawiec

Wednesday, April 21, 2021

Signals and interviews in the transition from medical school to residency

Late last year I was interviewed by Dr. Seth Leopold, who is a Professor in the Department of Orthopaedics and Sports Medicine at the University of Washington School of Medicine, and Editor-in-Chief of the journal Clinical Orthopaedics and Related Research.   That interview has just appeared ahead of print on the journal's website: 

A Conversation with … Alvin E. Roth PhD, Economist, Game Theorist, and Nobel Laureate Who Improved the Modern Residency Match  by Leopold, Seth S. MD, Clinical Orthopaedics and Related Research: April 7, 2021 - Publish Ahead of Print - doi: 10.1097/CORR.0000000000001758

Here's one part of our Q&A:

Dr. Leopold:You once commented in a Not the Last Word column in CORR® that the Match might be improved if a bit more room could be made for candidates to send “signals” to programs that indicate particular interest[5]; if you could make one change to the Match right now to make it fairer all around, what would that change be?

Dr. Roth: I don’t yet know enough about the whole pre-Match process of applications and interviews to answer that confidently. I’m hoping to gain access to data that will illuminate more clearly how applications lead to interviews, and how interviews interact with other kinds of information to influence what rank-order lists are submitted by applicants and programs. Some of that process is surely in flux, between the pandemic causing interviews to be conducted remotely and the United States Medical Licensing Examination Step 1 going pass/fail. Signaling is a way to address miscoordination in interviewing (such as whether too many interviews are concentrating on too few candidates), but there are other ways the interview process might be broken that might better be addressed by other tweaks in how interviews are organized.

Dr. Leopold:I believe the study you’re proposing here would find a very attentive audience, both in medical schools and residency programs across the country, especially competitive ones like orthopaedic surgery. Based on other kinds of markets you’ve evaluated—I recognize I’m asking you to speculate—what do you think you might find here?

Dr. Roth: Presently, in at least some specialties, many interviews are conducted for each residency and fellowship position. It could be that interviews play a critical role in allowing programs and applicants to assess each other, regardless of the other information they may have. But it could also be that at least some interviews are being conducted “defensively,” because all the interviews that others are participating in make it hard for each program or applicant to predict how likely any interview will lead to a position being offered and accepted in the Match. So, it is possible that there is “too much” interviewing, in the sense that in perhaps predictable ways, some programs are interviewing some candidates they can virtually never hire, and some candidates they would never want to hire. Conversely, applicants are interviewing for some jobs they have hardly any chance of being offered, and some they sensibly think they won’t need to take. Of course, some things can be predictable even if they can’t be predicted by individual applicants and programs with the information they now have available. It might therefore be possible to suggest institutional reforms that would help reduce the uncertainty in deciding which interviews to offer. That might also reduce the number (and costs) of interviews. (In just such a way, the Match helped solve the problem of uncertainty involved in offers and acceptances, back when offers were exploding.) And there’s a possibility that fewer interviews could make everyone better off in terms of expectations, particularly if participants on both sides of the market will feel a reduced need to do so many interviews if everyone else reduces the number they do. But as you say, until we can look into this carefully, I’m just speculating.

Tuesday, April 20, 2021

The surge in exam-optional applications for college admissions

 Covid forced lots of colleges to make standardized tests optional in admissions, and that seems to have jolted the growth in college applications to new highs.  The Chronicle of Higher Education has the story:

The Endless Sensation of Application Inflation  By Eric Hoover

"consider a big-deal development: the suspension of standardized-testing requirements. After most of the nation’s big-name colleges adopted test-optional policies for the 2020-21 cycle, they all but guaranteed a surge in applications from students who otherwise wouldn’t have applied. When that surge came, some admissions deans publicly expressed surprise that their testing requirements apparently had been suppressing applications from underrepresented students all along, just as critics of ACT and SAT requirements have been saying for decades.


"there are some drawbacks to having an overwhelming number of choices, Brennan says: “In admissions, you don’t get a 20-percent increase in staff to account for a 20-percent increase in applications.”

Monday, April 19, 2021

Controversial Markets: Public lecture at the Zurich Center for Market Design (video)

 A video of my April 13 lecture on Controversial Markets is now available at the Zurich Center for Market Design. (The talk proper is about an hour, and then includes some Q&A about compensation for donors, among other things, starting at around minute 56.)

Here's a direct link:

Sunday, April 18, 2021

Texas gas and electricity

 The electric power system failure in Texas following severe winter weather continues to draw commentary (and may eventually draw politically actionable conclusions).  The supply chain of electricity proved complex: e.g. some electric generation depended on natural gas supplies that themselves required electricity.

Here are some recent entries.

From the Federal Reserve Bank of Dallas:

Cost of Texas’ 2021 Deep Freeze Justifies Weatherization. by Garrett Golding, Anil Kumar and Karel Mertens

"Though the cost of annual preparations for extreme and relatively infrequent weather events has proven difficult for policymakers and industry to justify, the shocking aftermath of the February freeze and the resulting widespread power outage demand a careful re-examination. Our analysis indicates winterizing for extreme winter weather events appears financially reasonable.


"Temperatures dipped into the single digits and lower across much of Texas overnight on Feb. 14. Electricity demand surged as critical equipment failed at several power plants. Wind-farm output—already low due to diminished wind speeds—declined further as ice accumulated on turbine blades. Electricity generation declined yet again when gas-fired power plants were unable to procure needed gas supplies. Nearly 4 million Texas customers—representing more than 11 million people—lost power during the Arctic blast (Chart 1).

"While industry sources report gas production difficulties occurred because of wells and other such installations freezing, the bigger disruption began when power was cut to the wells, processing plants and compressor stations that move the gas into and along major pipelines serving power plants. During the storm, 38 of Texas’ 176 gas processing plants shut down due to weather conditions and electricity service disruption. Texas natural gas production dropped 45 percent Feb 13–17.

"This created a death spiral for electricity generation."


Here's Peter Cramton in the Dallas News:

Natural gas producers hit the jackpot during the power outages, but they failed Texas The electrical grid is only as reliable as its fuel supply.  by Peter Cramton

"starting on Feb. 11, the storm exposed every Texas county and much of the Midwest to frigid temperatures. Gas field equipment froze, and gas production began falling on Feb. 12, according to the Energy Information Administration, ultimately dropping 45%. Outages from gas-fueled power plants were double what planning models forecasted in the extreme-storm scenario. (Renewable resources, wind plus solar, performed better than expected during the storm.)

"With a deep drop in electricity supply and a sharp increase in demand, the system operator, the Electric Reliability Council of Texas, could not balance supply and demand without ordering controlled outages of about one-third of the system to prevent a catastrophic blackout. Those power cuts exacerbated gas delivery failures to many power plants.

"The failure of gas-fueled power was the proximate cause of the Texas electricity crisis. Had the gas supply been reliable, the electricity shortage would have been far less severe. 


"Fixing the Texas gas market is no easy task. Its regulator, the Texas Railroad Commission, is a textbook example of regulatory capture. For decades, the commission has operated as an advocate for the oil and gas industry. This cozy relationship contributed to the Texas disaster because the lack of gas field and pipeline preparation for cold was a major cause of the electricity outages — and one that better regulation would have avoided.


And here's the WSJ:

A Failure of Texas-Size Proportions’—State Debates How to Overhaul Its Power Market. February storm exposed flaws in laissez-faire electricity system; fixes promise to be complex and costly. by Katherine Blunt and Russell Gold

"Fixing the market promises to be as complex as it is costly. The challenge facing Texas Gov. Greg Abbott and state lawmakers is how to make the state’s deregulated power market more reliable, while limiting added costs that would make its electricity more expensive.

"Texas operates the nation’s only pure “energy only” electricity market, one in which producers are paid just for the power they sell, not the ability to deliver whenever watts are needed. All other deregulated electricity markets in the U.S. offer power generators some form of payment for being ready to produce power, to ensure the market has sufficient capacity to reliably provide an essential resource.

"For most of the past two decades, the Texas approach worked. It helped the Lone Star State keep wholesale power prices for much of the past two years at less than $30 per megawatt-hour on average, well below most other regional power markets.

"But a Texas grid that valued inexpensive power over reliability failed spectacularly during February’s winter storm and frigid temperatures, leading not only to crushingly high electricity prices, but power and water shortages that virtually shut down the state’s economy, and frozen pipes that caused widespread property damage."

Net capacity of generators, minute-by-minute

Saturday, April 17, 2021

The Leading Causes of Death in the US for 2020

 In the preliminary data for 2020, COVID is the number 3 cause of death in the US, after only heart disease and cancer.  (Kidney disease moves to number 10, from it's usual rank of 9...)

The Leading Causes of Death in the US for 2020  by Farida B. Ahmad, MPH; Robert N. Anderson, PhD JAMA. Published online March 31, 2021. doi:10.1001/jama.2021.5469

Friday, April 16, 2021

Foster care: professionalism vs. altruism, and related matters

 Foster care in families is one of the areas in which there is in many places considerable repugnance to paying the caregivers, partly out of fear that payment will attract the wrong kind of caregivers.  Partly as a consequence, there is a shortage of foster families for children in need.  Here's a 2008 survey that touches on these issues.

The Recruitment and Retention of Family Foster-Carers: An International and Cross-Cultural Analysis by Matthew Colton, Susan Roberts and Margaret Williams, The British Journal of Social Work, Vol. 38, No. 5 (July 2008), pp. 865-884  (pdf at JSTOR)

Abstract: Fostering services across the globe encounter difficulties in recruiting and retaining family foster-carers. Yet, we know little of the international and cross-cultural issues which impact on recruitment and retention. In this article, we draw on previous empirical research, and also on information collected during a recent study of global trends in family foster-care, to present an international comparative analysis of those issues. Three key themes emerged from the study: motivation and capacity to foster; professionalism versus altruism; and criteria for kinship and unrelated carers. Each of these presents a considerable challenge to foster-care services. Here, we explore these key themes further, and reflect on the implications for policy and practice.

" The recruitment and retention of family foster-carers are key to the delivery of  effective fostering services (Sellick and Howell, 2003). However, difficulties are  experienced on a global level with regard to recruiting and retaining sufficient  numbers of carers.


"Although many countries have seen an increase in the use of foster-care as  the placement of choice in recent years, there is a worldwide shortage of placements. In the UK, the shortfall has meant that in many cases, placements are  simply not available and, when a placement can be found, it is not the placement of choice (Sellick, 2006; Sellick and Thoburn, 2002; Pithouse et al., 2000).  The majority of placements are made in emergencies...

"Professionalism versus altruism:  The lack of adequate remuneration for unrelated as well as kinship carers has  had a detrimental impact on recruitment and retention. In the UK, much  research has focused on foster-carer payment (see, e.g. Kirton, 2001; Pithouse  et al., 1994; Sellick, 1992; Bebbington and Miles, 1990), with some commentators highlighting the 'confused and confusing' systems of payment associated  with foster-carers' status as employees, volunteers or professionals (Pithouse  et al., 1994, p. 45). It is clear that, in some cases, although payment did not  motivate foster-carers to care, the adequacy and efficiency of payment systems  sustained them when they were faced with children's challenging behaviour or  lack of progress (Kirton, 2001).


"In Sweden, foster-carers are remunerated for the child's board and lodging, and receive payment for their work  which is taxable, and deemed pensionable income (Hojer, 2006). Half the  foster-carers surveyed by Hojer (2001), however, felt that the payment they  received was too low. Further, some expressed fears that they would be perceived as greedy and that their foster-children would feel they were being looked after for financial reasons rather than personal commitment. As is the  case elsewhere, foster-carers in private agencies in Sweden generally receive  higher fees than those in the public sector. They receive a 'paid commission' as  opposed to being 'paid employees' of social services and are, therefore, not eligible to receive unemployment benefits when placements cease. There is thus a  degree of financial insecurity attached to the foster-carer role in Sweden—a  situation acknowledged by the government and subject to investigation (Hojer, 2006).


"Although the foster-care service in Fife, Scotland, had been  'fully professional' (Ramsay, 1996, p. 44) since 1990, carers' socio-demographic  characteristics were found to be similar to those of foster-carers in other studies  (see, e.g. Bebbington and Miles, 1990). Some financial reward, together with  the support provided by link social workers and foster-carer groups, proved  key to recruitment and retention. Indeed, payment of a professional fee to carers resulted, to some extent, in 'financial freedom', thus enabling them to care  (Ramsay, 1996, p. 46).

"The conflict between professionalism and altruism presents as a real issue for  fostering services today, and recruitment may become even more difficult if  foster-carers continue to be inadequately paid. In some countries, for example,  the rate of pay for a foster-family providing full care to a child aged four to  eleven years amounts to less than it costs to keep a dog in a kennel. One of the  justifications for this is that a higher rate of pay will attract those who want to  foster for financial as opposed to altruistic reasons (Martin et al., 2006)."


Stanford GSB Ph.D. student Cameron Taylor has a working paper modeling the decision of families to provide foster care:

Fostering Children, by Cameron Taylor, November 13, 2019 

"Foster care is an important social service. In the US, hundreds of thousands of children enter the foster care system every year due to substantiated reports of abuse or neglect. Foster children tend to have lower educational attainment, and significantly higher rates of incarceration and homelessness than the general population (Gypen et al., 2017). They represent some of the most disadvantaged children in society.

"The foster care market is organized so that children are removed from their birth homes and then placed either in institutional settings or with volunteer families. The driving motivation behind placing children with families is that keeping children in family environments can stimulate higher quality childcare through “normal childhood experiences” (Welfare and Institutions Code 16000).

"While previous work has focused on the effects of different margins of foster care on child welfare outcomes, very little is understood about how or why families choose to be foster parents. This paper studies how families choose to be foster parents through the lens of a simple price theoretic household model"


Here's a paper presented yesterday at the 2021 NBER Decentralization Conference on Mechanism Design for Vulnerable Populations  

Abstract: This paper presents an empirical framework to study the assignment of children into foster homes and its implications on placement outcomes. The empirical application uses a novel dataset of confidential foster care records from Los Angeles County, CA. The estimates of the empirical model are used to examine policy interventions aimed at improving placement outcomes. In general, it is observed that market thickness tends to improve expected placement outcomes. If placements were assigned across all the administrative regions of the county, the model predicts that (i) the average number of foster homes children go through before exiting foster care would decrease by 8% and (ii) the distance between foster homes and children’s schools would be reduced by 54%.


And here's a working paper that models the matching of children to foster families:

Search and Matching for Adoption from Foster Care  by Nils Olberg, Ludwig Dierks, Sven Seuken, Vincent W. Slaugh, M. Utku Ünver

"More than 100,000 children in the US foster care system are currently waiting for an adoptive placement. Adoption agencies differ significantly in what systems they use to identify matches between families and children. We consider two prominent alternatives: (1) family-driven search, where families respond to announcements made by the caseworker responsible for a child, and (2) caseworker-driven search, where caseworkers utilize a software tool to perform a targeted search for families. In this work, we compare these two systems via a game-theoretic analysis. We introduce a dynamic search-and-matching model that captures the heterogeneous preferences of families and children. This allows us to study their incentives during the search process, and we can compare the resulting welfare of the two systems in equilibrium. We first show that, in general, no system dominates the other, neither in terms of family welfare nor in terms of child welfare. This result maybe surprising, given that the caseworker-driven approach employs a less wasteful search process. However, we do identify various advantages of the caseworker-driven approach. Our main theoretical result establishes that the equilibrium outcomes in caseworker-driven search can Pareto-dominate the outcomes in family-driven search, but not the other way around. We illustrate our results numerically to demonstrate the effect different model parameters (e.g., search costs and discount factors) have on welfare."

Thursday, April 15, 2021

Limiting job applications in an online labor market: by John Horton and Shoshana Vasserman

 Here's an experiment that involved limiting the number of applications to particular jobs in an online labor market, in which many applicants are likely close substitutes.

Job-Seekers Send Too Many Applications: Experimental Evidence and a Partial Solution by John J. Horton and Shoshana Vasserman

Abstract: As job-seekers internalize neither the full benefits or costs of their application decisions, job openings do not necessarily obtain the socially efficient number of applications. Using a field experiment conducted in an online labor market, we find that some job openings receive far too many applications, but that a simple intervention can improve the situation. A treated group of job openings faced a soft cap on applicant counts. However, employers could easily opt out by literally clicking a single button. This tiny imposed cost on the demand side had large effects on the supply side, reducing the number of applicants to treated jobs by 11%—with even larger reductions in jobs where additional applicants were likely to be inframarginal. This reduction in applicant counts had no discernible effect on the probability a hire was made, or in the quality of the subsequent match. This kind of intervention is easy to implement by any online marketplace or job board and has attractive properties, saving job-seekers effort while still allowing employers with high marginal returns to more applicants to get them.

"In this paper, we describe an experiment conducted in an online labor market that influenced the size of applicant pools faced by employers.1 This was done by imposing a soft cap on the number of applicants that a job opening could receive, as well as limiting the duration of the window of time during which applications could be received: when a job opening received 50 applicants—or when 120 hours (5 days) had passed—no more applicants could apply unless the employer explicitly asked for more applicants. The intent of the intervention was to prevent job-seekers from applying to jobs where their application was likely to either be ignored or simply displace some other applicant, without preventing employers with high marginal returns to more applicants from obtaining them.


There is no evidence that better or worse matches were made in the treatment group, as measured by the feedback given by the employer at the end of the contract or in hours-worked. If anything, employer satisfaction rose slightly in the treatment.

The lack of effects on hiring or match quality is seemingly surprising, but likely reflects the fact that price competition among workers “prices in” vertical differences among workers, leaving firms close to indifferent over applicants, as in Romer (1992). Because of this indifference, substitution among applicants is not very costly to employers.


"only about 7% of employers requested more applicants by pushing the button.

"The treatment intervention likely saved job-seekers substantial time—more so than the percentage changes in job post applicant counts would seemingly imply. To see why the treatment has out-sized effects on job seekers, note that although relatively few job openings were affected by the 50 applicant cap (about 10%), these job openings are disproportionately important to job-seekers, as they attracted 43% of applications. This difference simply reflects the fact that a randomly selected application is more likely to be sent to a job with a high applicant count.

Wednesday, April 14, 2021

Exploding offers of admission to Notre Dame Law School

Notre Dame Law School has apparently sent out more acceptance letters than it has positions, and the offers will expire automatically once sufficiently many students have accepted them by making a binding deposit.  Read on and see that there was also a threat to students who had been offered financial aid.  (I wonder if this will work out the way Notre Dame wants, or if enough law students are rich enough to make more than one deposit...)

 The blog "Above the Law' has the story:

Chaos Reigns: Notre Dame Law School Tells Non-Wealthy Students ‘Thanks, But No Thanks’ By Kyle McEntee and Sydney Montgomery

"Notre Dame makes application decisions on a rolling basis instead of a pre-selected date. Once an applicant is admitted, the school requires two deposits to confirm enrollment. Law schools have used this process (more or less) without incident for decades.

"Most law schools ask applicants to deposit by a certain date, traditionally mid-April to early May. Notre Dame’s first deadline was April 15 and required a $600 non-refundable deposit. Notre Dame’s offer letter, however, increased the pressure with an unusual warning. The school informed applicants that they had until the deadline or “when we reach our maximum number of deposits.


"For the applicants who received a scholarship offer, pressure mounted with a second warning.

"While most law schools frown on double-depositing (holding seats at more than one law school), Notre Dame warned scholarship recipients that they may lose their scholarship offer if the applicant also deposits at another school.


"In other words, if you want to come to our school at the price we’re offering, you’d better send us a non-refundable deposit now."

HT: Paul Kominers, Parag Pathak


I recall that decades ago, a certain midwestern Economics department (just) once made more offers of graduate fellowships than it had, with the fellowship offer expiring when enough acceptances had been received. No binding deposits were involved in that episode, however.

Tuesday, April 13, 2021

The complex economics of dialysis and insurance, in Freakonomics

 Freakonomics peeks under the rocks to see what crawls out:

Is Dialysis a Test Case of Medicare for All? (Ep. 457)  by Stephen J. Dubner

"But as he dug into their business, he discovered what looked like a suspicious relationship between the two dialysis chains and a charity called the American Kidney Fund, whose mission is to provide financial support to needy patients.

CHANOS: So, the American Kidney Fund will help various patients pay for private policies. 

Private insurance policies, that is, instead of Medicare.

CHANOS: The patient is strongly urged because of quality of care, convenience, whatever the case might be, that they will be treated better as a commercial-policy patient rather than a government-policy patient and that the American Kidney Fund could help them pay those premiums.

On its surface, that does not sound like a terrible thing for a kidney charity to do. But Chanos looked at it from the perspective of the dialysis industry.

CHANOS: If the dialysis companies could push people that would normally be eligible for Medicare into commercial policies, private policies, they could charge those companies often two to four times what the going Medicare reimbursement rate was.

And Chanos believed that pushing people onto commercial insurance is exactly what the American Kidney Fund was doing. It’s helpful here to follow the money.

CHANOS: It will come as probably no shock that the two largest donors to the American Kidney Fund are the two largest dialysis companies, Fresenius and DaVita. 

In 2018, DaVita and Fresenius reportedly donated a combined $247 million to the American Kidney Fund — or about 80 percent of the charity’s revenues.

CHANOS: So, they are basically putting money into the charity. The charity is turning around and using that money to help pay premiums to enroll patients in commercial insurance. And then, the commercial insurers are charged a huge premium to what the dialysis companies are charging the government. 

It’s estimated that for every dollar that DaVita or Fresenius send to the American Kidney Fund, they receive $3.50 in return from private-insurance payments.

CHANOS: And that’s the problem. 

One especially interesting part of this arrangement is who’s losing money: the insurance companies! It’s not often you hear about insurance companies on the losing end — and maybe you don’t have much sympathy.

CHANOS: “Well, it’s the private sector, right? So, why should we care if the insurers make less profits?” Well, the fact of the matter is it’s raising premiums for everybody in the exchanges.

That is, the insurance exchanges, the marketplaces created by the Affordable Care Act, also known as Obamacare.

CHANOS: And the head of California Blue Cross Blue Shield was on the record saying that the dialysis in California was driving up private policy rates dramatically"

Monday, April 12, 2021

Controversial markets, at the Zurich Center for market design

 I'll be speaking tomorrow (via Zoom) at the Zurich Center for Market Design

My topic will be Controversial Markets:

Details for Talk on: 13.04.2021

  • Speaker: Alvin E. Roth (Stanford University)
  • Title: Controversial Markets
  • Abstract: I became interested in controversial markets when I started to study kidney transplantation, because buying and selling kidneys for transplants is illegal (almost) everywhere.  Since then I’ve had a chance to think about a variety of transactions that are legal in some places and not in others, including prostitution, surrogacy, and various forms of kidney exchange, some of which are still controversial.  I’ll include examples that seem controversial in Switzerland.
  • Bio: Al Roth is the Craig and Susan McCaw Professor of Economics at Stanford University. He shared the 2012 Nobel memorial prize in Economics. His research interests are in game theory, experimental economics, and market design. He directed the redesign of the National Resident Matching Program, through which most American doctors find their first employment. He helped design the high school choice system used in New York City and the matching systems for students of all ages in several other large American cities. He is one of the organizers and designers of kidney exchange in the United States, which helps incompatible patient-donor pairs find life-saving compatible kidneys for transplantation. This work led him to become interested in repugnant transactions, and more generally how markets, and bans on markets, gain or fail to gain social support. You can find his blog on market design at

Externals who are interested in the talk can contact Sally Gschwend ( to receive the link to the Zoom webinar.

Sunday, April 11, 2021

Mechanism Design for Social Good (MD4SG) conference on Equity and Access in Algorithms, in October

 The  Mechanism Design for Social Good (MD4SG) initiative is organizing a conference from  October 5-9, 2021. Here's the announcement and call for papers:

The inaugural Conference on Equity and Access in Algorithms, Mechanisms, and Optimization (EAAMO ‘21) will take place on October 5-9, 2021, virtually, on Zoom and

"The goal of this event is to highlight work where techniques from algorithms, optimization, and mechanism design, along with insights from the social sciences and humanistic studies, can improve access to opportunity for historically underserved and disadvantaged communities.

The conference aims to foster a multi-disciplinary community, facilitating interactions between academia, industry, and the public and voluntary sectors. To this end, it takes a broad view of how research can contribute to access to opportunity, and welcomes work from along all stages of the research-to-practice pipeline. This also includes work that surfaces novel insights into the workings of social systems. The program will feature keynote presentations from researchers and practitioners as well as contributed presentations in the research and policy & practice tracks.

We solicit submissions in the research track and policy and practice track. Submissions can include research, survey, and position papers as well as problem- and practice-driven submissions by academics from any discipline and practitioners from any sector."

Saturday, April 10, 2021

PhD-studentship at Durham University studying international kidney exchange

 Peter Biro forwards this announcement

PhD-studentship at Durham University in Cooperative Game Theory

Please find below details on a PhD-studentship in the Algorithms & Complexity Group ( at the Department of Computer Science of Durham University for the project: International Kidney Exchange: How to Ensure Stability?

The PhD-studentship provides full tuition fees and a maintenance grant for 42 months (£15,609 for 2021/2022) both for UK students and international students.

Deadline for applications: 10 May 2021 but the review of applications may close earlier if the PhD studentship is filled.

Starting date: 1 October 2021.

Project summary:  A kidney patient may have a willing donor, but a kidney transplant might not be possible due to blood- or tissue-type incompatibilities. However, patients and donors may be swapped after all patient-donor pairs are pooled together and one seeks to do this optimally (via a solution of a graph decomposition problem). We consider the situation where pools from multiple countries are merged. To keep an international kidney exchange program (KEP) stable, it is crucial that any proposed solutions will be accepted by all participating countries. The goal of this project is to research and improve stability of international KEPs using classical fairness concepts from Cooperative Game Theory. As such, the project has both a theoretical and experimental component.

The project involves a collaboration with the Mechanism Design Group, led by Dr Péter Biró, of The Centre for Economic and Regional Studies in Budapest (

Supervisory team: Prof. Daniel Paulusma (Durham, and Prof. Matthew Johnson (Durham,

Applications are welcomed from students with a first class degree or equivalent in Computer Science or Mathematics. Programming experience is essential.

To apply, please visit Applicants are encouraged to contact Daniel Paulusma at<> in advance of making an application.

Friday, April 9, 2021

17th Matching in Practice workshop May 10 - May 11

 Here's an announcement for the (online) 17th Matching in Practice workshop  May 10 - May 11. (The submission deadline is tomorrow.)

"We are happy to announce call for papers for the 17th Matching in Practice workshop on May 10 and 11.

The workshop will virtually occur in Saint Petersburg, the place that should have hosted the regular workshop a year ago.  One year is a long time, so we announce a new call for papers, with previously accepted presenters having priority in case they want to present.

We are excited to have Utku Ünver as our plenary speaker.

This time we will devote a bit longer slot of time for the policy roundtable. We will discuss the idea of a centralized job market for economists. Andrew Johnston, Itai Ashlagi, Laura Doval, Alex Teytelboym, and Dorothea Kübler nicely agreed to participate in the round table. As we have some academic perspective on the topic and participated in the market on either side, we hope for a fruitful and dynamic discussion. The round table will take place on May 10.

The deadline for submitting a paper is April 10.

Alex Nesterov will be the local organizer, and the scientific committee will consist of Alex + Li Chen (previous workshop organizer) and ourselves.

Please send your submissions directly to Alexander:"

Thursday, April 8, 2021

Congestion in vaccine delivery: uncancelled extra appointments

 In school choice, the reason universal enrollment systems that give each child one assignment are so desirable is that if children are accepted by multiple schools, it often takes time (e.g. the first week of the school term) to sort out which children are going where, and to free up the unclaimed spaces.

The same thing is happening with decentralized appointments for Covid vaccines. The WSJ has the story:

Got Your Covid-19 Vaccine? Now Cancel Your Extra Appointments.  Pharmacies and community clinics say uncanceled appointments lead to no-shows, adding to their already heavy workload   By Jaewon Kang and Sharon Terlep

"Pharmacies and health officials are making a plea to Americans who received their Covid-19 vaccines: Cancel the other shots you booked.

"As vaccine eligibility expands and more places offer shots, many people are signing up for multiple appointments and not backing out of the ones they don’t need. The resulting influx of no-shows is forcing vaccine providers, from pharmacies to community clinics, to find last-minute replacements so doses aren’t wasted.


"Appointments remain tough to score in many parts of the country even though the overall supply of vaccines and the pace of inoculation are improving. Some people are making multiple bookings in hopes of getting vaccinated sooner or sometimes because they don’t receive or see confirmation emails, according to pharmacies and community vaccination sites. Others receive shots at pop-up vaccination events before scheduled appointments and don’t notify providers.

"The U.S. lacks a concrete system of tracking wasted doses. Generally, local and state officials say that demand is high enough that no-shows aren’t leading to tossed vaccines, though vaccine providers say they sometimes fail to find takers for all the doses they have thawed in time to use them all safely."


Previous post:

Monday, February 15, 2021

Wednesday, April 7, 2021

Organ donation in England: what will be the effect of "soft opt-out"?

 Here's an article arguing that the shift from opt-in deceased organ donation to opt-out plus family consent may not be a big one unless communication between clinicians and bereaved families is improved.

Khiroya H, Sharif A, Jones J, Willis D. Will the unusual become usual? A new legal change that aims to increase discussions around organ and tissue donation in England. Future Healthc J. 2021 Mar;8(1):e170-e173. doi: 10.7861/fhj.2020-0098. PMID: 33791502; PMCID: PMC8004295.

Abstract: "UK guidelines recommend that discussions about organ and tissue donation are conducted as part of end-of-life care. However, there are several barriers to discussing organ donation, and this is reflected in a critical shortage of donors. This article explores who should start the conversation about donation and how all healthcare practitioners can maximise their communication skills to have success in this area. It is particularly pertinent to be upskilled in this area in light of the recent legal change in England, where the system moved from an opt-in to a ‘soft’ opt-out one. Based on a similar legal change that took place in Wales and global data, it is unlikely that the legal change alone will prompt an increase in donation rates in England. This article proposes suggestions to increase awareness and conversations among healthcare professionals and patients with education, public health campaigns and interventions rooted in psychological theory."

"Despite major changes in the infrastructure for organ donation in the UK since 2008, there are not enough donated organs to meet the current need.5 Only 1% of annual deaths in the UK occur in circumstances where the deceased could be a potential donor.6 Identification and availability of sufficient donor organs are are major barriers for transplantation, but the most important barrier is widely acknowledged as failure to secure consent for organ retrieval.

"Black, Asian and minority ethnic (BAME) groups have low rates of deceased donation, which results in significantly longer waiting times for transplantation when compared with white patients.17 Low rates of donation are due to uncertainties around religious permissibility and a lack of trust in healthcare professionals by BAME patients, coupled with clinicians’ lack of confidence in communicating with and supporting BAME families.18 There is evidence to suggest that discussing topics such as organ donation and end-of-life care is more acceptable to BAME groups if conversations are conducted by members of their own community.


"The law changed in England on 20 May 2020, with organ and tissue donation moving from an opt-in to a ‘soft’ opt-out system.27,28 All adults in England are now considered to be potential organ donors when they die and family permission to proceed will be sought, unless they have previously recorded a decision not to donate organs, or are in one of the excluded groups.


"In December 2015, a similar legal change took place in Wales where the system is ‘deemed consent’. This means that if a person has not recorded an opt-in or opt-out decision, it is considered that they have no objections towards organ and tissue donation.


"The opt-out system has been received positively in Wales with 71% of the Welsh public saying they were in favour of it 1 year after the change in legislation.35 However, positive attitudes among the public and increased knowledge among healthcare professionals have not translated to a rise in donors.


"On a global scale, the data on organ and tissue donation between opt-in and opt-out countries draw ambivalent conclusions due to dated studies and heterogeneous methodology. Confounding variables include varying economies, public health campaigns and cultural attitudes towards donation. A recent study looking at 35 countries demonstrated no significant difference in deceased organ donation or solid organ transplantation between opt-in and opt-out countries.38 This is in keeping with the short-term data that we have from the recent law change in Wales.35,36 Given that the law change itself may not make a difference in England, it is worth thinking about future avenues in education, public health and psychology that can enhance the impact of the new opt-out system."

Tuesday, April 6, 2021

Cloud Pricing: The Spot Market Strikes Back, by Dierks and Seuken in Management Science

 Sven Seuken writes:

"I just read your blog post about the new paper on economics of cloud computing, which is very interesting. Given that you highlighted the authors' thoughts on why auctions are not used in cloud computing markets, I thought you might be interested in a recent paper coming out of my group, which was just published at Management Science:

"In our model, we assume that a cloud provider must *always* offer a standard, non-preemptible fixed-price market (because only this satisfies many customers' business needs, which is in line with the arguments that Hummel and Schwarz provide). But we show that a cloud provider can typically increase her profit and create a Pareto improvement for the users by *additionally* selling idle instances on a preemptible spot market (e.g., via an auction).

"Here's the paper and abstract:

Ludwig Dierks , Sven Seuken 
Published Online:25 Feb 2021

Abstract: Cloud computing providers must constantly hold many idle compute instances available (e.g., for maintenance or for users with long-term contracts). A natural idea, which should intuitively increase the provider’s profit, is to sell these idle instances on a secondary market, for example, via a preemptible spot market. However, this ignores possible “market cannibalization” effects that may occur in equilibrium as well as the additional costs the provider experiences due to preemptions. To study the viability of offering a spot market, we model the provider’s profit optimization problem by combining queuing theory and game theory to analyze the equilibria of the resulting queuing system. Our main result is an easy-to-check condition under which a provider can simultaneously achieve a profit increase and create a Pareto improvement for the users by offering a spot market (using idle resources) alongside a fixed-price market. Finally, we illustrate our results numerically to demonstrate the effects that the provider’s costs and her strategy have on her profit.

Monday, April 5, 2021

Some economics of providing cloud computing, by Microsoft economists Hummel and Schwarz

 Here's a paper on an aspect of cloud computing by two Microsoft economists. (Microsoft's cloud service is called Microsoft Azure.)  In addition to the capacity question the paper models, it presents a brief, clear overview of the market for cloud computing.

Efficient Capacity Provisioning for Firms with Multiple Locations: The Case of the Public Cloud  by Patrick Hummel∗ and Michael Schwarz*   March 26, 2021

Abstract: This paper presents a model in which a firm with multiple locations strategically chooses capacity and prices in each location to maximize efficiency. We find that the firm provisions capacity in such a way that the probability an individual customer will be unable to purchase the goods the customer desires is lower in locations with greater expected demand. The firm also sets lower prices in larger locations. Finally, we illustrate that if a customer is indifferent between multiple locations, then it is more efficient to place this customer in a location with greater expected demand. These theoretical results are consistent with empirical evidence that we present from a major public cloud provider.

"2.1 Industry Overview

"The cloud computing industry is young, large, and rapidly growing. Although some of the concepts behind the public cloud were developed as early as the 1960s, all modern public clouds first emerged in the 21st century (Foote 2017). Today annual world cloud revenues exceed $250 billion and are expected to grow by another 20% in 2021 (Graham et al. 2020a).

"The public cloud consists of a wide range of services including infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS). SaaS involves providing applications such as web-based email and productivity software to a consumer that can be accessed via the Internet. PaaS provides a platform for deploying consumer created applications using the provider’s programming languages, libraries, and tools.

"And IaaS provisions fundamental computing resources such as processing, storage, and network to a consumer that can be used to deploy and run arbitrary software (Mell and Grance 2011)."

"2.5 Why Auctions are Not Used
"Since cloud providers provision enough capacity to almost always be able to meet demand, if a cloud provider used an auction to sell compute to customers, the final price at the auction would almost always be equal to the reserve price. However, since cloud customers typically have a value per unit of compute that is orders of magnitude higher than the corresponding capacity costs, in the rare event that there was not enough capacity to meet all demand, the final price in an auction would be dramatically higher
than the cloud provider’s costs. Thus, if a cloud provider used an auction to sell compute to customers, there would be a very high probability that all customers could obtain all the compute they wanted at a low price and a low probability that the final price would
be very high.

"There are two problems with this pricing that would make auctions unsuitable in practice. First, using an auction results in a very high amount of uncertainty about the final realized prices. Thus, if either the cloud provider or the cloud customers are at all risk averse, using an auction to set prices will not meet either the cloud provider’s or the cloud customers’ needs.

"Second, under an auction a cloud provider has a far stronger incentive to underinvest in capacity than under a fixed price mechanism. Under a fixed price mechanism, the cloud provider’s revenue can only go down as a result of underinvesting in capacity, as the cloud provider will not be able to service as much demand. But under an auction, underinvesting in capacity will significantly increase a cloud provider’s revenue by increasing the probability that there will not be enough capacity to meet demand, thereby increasing the probability that the final price in the auction will be very high. Thus, using a fixed price mechanism also enables a cloud provider to more credibly commit to provision the efficient amount of capacity. We illustrate these points formally in Appendix A in the