A rose by any other name: marriage market version

'Bride' and 'Groom' to Be Restored to Calif. Forms

"When same-sex marriage became legal in the state on June 16, new marriage forms were issued with ''Party A'' and ''Party B'' where ''bride'' and ''groom'' used to be.
The new paperwork, which county clerks must start using Nov. 17, will have space for applicants' names next to optional boxes for checking ''bride'' or ''groom.'' "

Gaming the system, changing the rules. Pro Football

Rules evolve, as changes are made in reaction to unwanted behavior that the old rules elicit. The NFL will now allow coaches to communicate by radio directly with defensive players, reducing the need for hand signals.

The NY Times reports:
"Maybe defensive coaches should thank New England Coach Bill Belichick for trying to steal their signals. The N.F.L. had discussed giving the communication system to defenses in previous years, but in 2006, the measure fell two votes short of approval.
"Last spring, after Belichick was found to be videotaping opponents’ defensive signals, teams approved the plan by two votes. The nays were cast mostly by teams with offensive-minded coaches. The decision largely minimized the need for the hand signals that Belichick had been trying to glean. The Patriots were among the teams that switched their vote, from opposed to in favor. "

Market for Basketball Players

At 19, Plotting New Path to N.B.A., via Europe
The NY Times reports that "The N.B.A. changed its eligibility rules for the 2006 draft, requiring players to be at least a year past their high school graduating class before turning pro."
That has sent some high school stars to college, but another path is to play pro ball in Europe, while waiting for the NBA.

Market design by committee

In the NY Times, A Snarl of Regulation quotes Secretary Paulson:
"Few, if any, will defend our current Balkanized system as optimal"
It comes with a diagram of the current financial regulatory organizations.

Auctioneers and sellers: Sotheby's mixed role

The WSJ reports Sotheby's Faces Suit Over Disclosure
"Mr. Minor's attorneys say he purchased the work on advice from a Sotheby's specialist and didn't realize the auction house was selling the work to recoup money owed it by another collector. ...
Mr. Minor's suit highlights the increasingly blurred lines that can develop at auction houses between their traditional role as disinterested auctioneers and their emerging business as direct stakeholders or financiers of the work they auction. In their competition for market share and their battle to secure top art work, Sotheby's and Christie's are increasingly acquiring, trading and preselling stakes in works they auction."
...
"For buyers, deciphering the financial dealings behind a work of art has become increasingly difficult. In some cases, like Mr. Minor's, auction houses sell the work as collateral for loans. More commonly, they issue so-called "guarantees" -- promises to pay the seller a minimum price for the work sold through the auction house. The auction house has to pay the guarantee even if the work doesn't sell, so it becomes an effective stakeholder.
Guarantees have surged in recent years. Last year, Sotheby's issued $902 million in guarantees, double the amount in 2006, according to securities filings."

Slow liquidation of Wachovia Short Term Fund

The NY Times reports: Colleges Scramble as Investment Fund Freezes.
To avoid a run as it liquidates (with withdrawals outpacing the ability of the fund to sell its short term assets in an orderly way), Wachovia has limited the rate at which its investors (colleges) can withdraw.

Prison economy

The WSJ writes about currency substitutes for trade among inmates in
American prisons (subscription required):

Mackerel Economics in Prison Leads to Appreciation for Oily Fillets
Packs of Fish Catch On as Currency, Former Inmates Say; Officials Carp

"Unlike those more expensive delicacies, former prisoners say, the mack is a good stand-in for the greenback because each can (or pouch) costs about $1 and few -- other than weight-lifters craving protein -- want to eat it."

Prediction Markets at Best Buy

Best Buy is running one of the largest internal corporate prediction markets. The experiment raises interesting questions about incentives for managers whose projects are "listed" on the market, as well as questions about how to design simple interfaces that thousands of non-experts can use.

"When executives at electronics retailer Best Buy Co. want to know if a new product or idea is likely to succeed, they can seek the opinion of rank-and-file employees by turning to the company's "prediction market."

The market, called TagTrade, allows Best Buy's workers to trade imaginary stocks based on answers to managers' questions. The market's judgment has often proved to be more accurate than the company's official forecasts."

(subscription required to see full article)

The credit crisis: anatomy of a market failure

The NY Times reports on 36 Hours of Alarm and Action as Crisis Spiraled.

"...But contagion was already spreading. The problem posed by the Lehman bankruptcy was not the losses suffered by hedge funds and other investors who traded stocks or bonds with the firms. As federal officials had predicted, that turned out to be manageable. (That was one reason the government did not step in to save the firm.)
The real problem was that a handful of hedge funds that used the firm’s London office to handle their trades had billions of dollars in balances frozen in the bankruptcy. "

University tuition in England

Top universities are funded differently in the UK and the US:
Oxford's Chancellor Argues for Raising Tuition Fee .
Oxford would like to have more control over its tuition.

(Recall my earlier post: University tuition in Israel )

Auction design for bailout by treasury--Ausubel and Cramton

Peter Cramton writes: Dear Al,
Here is the longer version of my paper with Larry Ausubel on possible details of a troubled asset reverse auction. It might even be a good topic for your market design class.
"A Troubled Asset Reverse Auction" (with Lawrence M. Ausubel), Working Paper, University of Maryland, September 2008. [Presentation]

A Troubled Asset Reverse Auction
Lawrence M. Ausubel and Peter Cramton
30 September 2008
Summary
The US Treasury has proposed purchasing $700 billion of troubled assets to restore liquidity and solve the current financial crisis, using market mechanisms such as reverse auctions where appropriate. This paper presents a high-level design for a troubled asset reverse auction and discusses the auction design issues. We assume that the key objectives of the auction are to:
· provide a quick and effective means to purchase troubled assets and increase liquidity;
· protect the taxpayer by yielding a price for assets related to their value; and
· offer a transparent rules-based process that minimizes discretion and favoritism.
We propose a two-part approach.
Part 1. Groups of related securities are purchased in simultaneous descending clock auctions. The auctions operate on a security-by-security basis to avoid adverse selection. To assure that the auction for each security is competitive, the demand for each security is capped at the total quantity offered by all but the largest three sellers. Demand bids from private buyers are also allowed. The simultaneous clock auctions protect the taxpayer by yielding a competitive price for each security and allow bidders to manage liquidity constraints and portfolio risk. The resulting price discovery also improves the liquidity of the securities that are not purchased in the auctions.
Part 2. Following Part 1, the remaining quantity is purchased in descending clock auctions in which many securities are pooled together. To minimize adverse selection, reference prices are calculated for each security from a model that includes all of the characteristics of each security including the market information revealed in the security-by-security auctions of Part 1. Bids in the pooled auctions are specified in terms of a percentage of the reference price for each security.
The two parts are complementary. Part 1 quickly adds liquidity and establishes competitive market prices for many securities. Additional assets are then purchased in Part 2, taking full advantage of the market information revealed in Part 1.
Clock auctions have been used successfully in the electricity and natural gas sectors for assets worth tens of billions of dollars over the last seven years. Related approaches have been used to auction emission allowances, radio spectrum, timber rights, and rough diamonds.
The approach is feasible even on an extremely tight timetable. The development of the reference price model and data will require the most time to complete, but fortunately this is not needed until Part 2. The auctions of Part 1 can begin in a matter of weeks.
We limit the scope of the paper to taking the legislation as given and providing an auction design within the requirements of the legislation.
The paper is organized as follows. We begin by explaining the adverse selection problem that arises when different securities are pooled together. Then we provide an overview of the two-part reverse auction plan. Next we develop details of Part 1, the security-by-security auctions. We then present the motivation for the simultaneous descending clock auction. Next we present further details of Part 2, the pooled auctions. Then we explore how stock warrants and senior debt can be usefully incorporated into the purchases of troubled assets. Next we discuss the feasibility of successful implementation on an expedited schedule. We conclude that the design achieves the key objectives and can be implemented with minimal risk in a short period of time.

Job market; online and offline

A NY Times columnist surveys the uses of different job search technologies, from shoe leather, to the internet, to the social internet: Job Hunting Is, and Isn’t, What It Used to Be


"The big three sites are Monster.com, CareerBuilder.com and Yahoo HotJobs.com. Craigslist is also a popular option, as are those like Indeed.com and SimplyHired.com, which aggregate big and small jobs sites.
"Niche sites are also growing. Doctors can check out PracticeMatch.com; those seeking nonprofit work can go to Idealist.org. TheLadders.com is popular for job seekers looking for executive positions that pay more than $100,000 a year."


"Mr. Challenger suggests limiting yourself to surfing such sites only after dinner. Use the daytime to get out and meet people as much as possible."

Pollution permits: RGGI auction results

RGGI, Inc. reports on their first auction.

The WSJ environmental blog report, Capping Carbon: Northeast Utilities Pay to Pollute, But Does That Matter?, says that
"Six of the ten states in the scheme offered 12.5 million permits for power companies to pollute. Bidders actually wanted more than 50 million permits, a sign of serious interest among utilities in getting their hands on the permits. (And it was largely utilities that were bidding; organizers said power companies, rather than environmental groups or third-party traders, bought “most” of the allowances.)
But demand wasn’t strong enough to actually make the emissions permits expensive: The auction price of $3.07 a ton was a little bit above the minimum bid price of $1.86 a ton, and just below the $4-something figures bandied about ahead of the auction. In comparison, greenhouse-gas emissions permits in the European scheme are trading at about $37. "

A firm hired by RGGI to monitor the auction reports no problems. The report includes the following:
"Based on our monitoring of participant conduct in the auction, we find no
material evidence of collusion or manipulation by bidders. The vast majority of bids were submitted in line with competitive expectations."

College football bowls

How Economics May Lead to Better Football Games, an interview based on the paper
Frechette, Guillaume, Alvin E. Roth, and M. Utku Unver, "Unraveling Yields Inefficient Matchings: Evidence from Post-Season College Football Bowls," Rand Journal of Economics, 38, 4, Winter 2007, 967-982, with an online appendix).

Unraveling of college admissions--deadline creep

It's not just early action and early decision anymore; regular college admissions can also unravel. The Chronicle of Higher Education reports (Admissions Group Moves to Stop 'Deadline Creep') that
"The National Association for College Admission Counseling has a message for member institutions: Do not rush applicants into accepting offers.

On Saturday, during its annual meeting here, the association revised its professional guidelines to clarify that colleges may not solicit commitments from first-year applicants before May 1—the long-recognized notification deadline. In approving the new language, the association also affirmed that admissions offers must clearly state whether deposits submitted before May 1 are refundable.

Concerns about “deadline creep” prompted the revisions, said Ken Fox, departing chairman of Nacac’s Admissions Practices Committee. In recent years, some colleges have informed admitted students that they must accept or decline financial-aid offers before May 1, a violation of Nacac’s Statement of Principles of Good Practice. High-school counselors have also complained that some institutions pressure students by urging them to send housing deposits in March or April."

Furthermore
"On Saturday, Nacac also approved a change in its guidelines that will prohibit colleges from asking "regular-decision" applicants to rank their preferred colleges in order. Previously, the association stated only that colleges should not “require” such information, and some institutions continue to include the question on application materials, with the word “optional” beside it."

Repugnant transactions in France

Legendary French bistro Lipp accepts Coke— at arm's length (in their new Mexican branch:)

"There are about a hundred wines on the list, along with a wide range of beers and water — but the only fizzy drink in this most Gallic of French restaurants is Schweppes tonic, which was authorised, after anguished debate, to enable Lipp's British customers to enjoy gin à l'anglaise.
“We allowed that in the name of entente cordiale, but we have never sold a bottle of Coca-Cola,” Mr Guittard told The Times.The only customers who asked for it were children and foreign visitors such as Bill Clinton, who dined at Lipp in 2006.
The former US President wanted to wash down his cassoulet with a Coca-Cola “but we didn't give in and so he had bordeaux instead”, said Mr Guittard. "

Market for scientists

The market for biochemists is changing: pharma and biotech beckon, the path to academic tenure is strewn with obstacles:

"A decade after 26 members of the entering class of 1991 earned their Ph.D.s from Yale's elite molecular biophysics and biochemistry program, only one holds a tenured faculty position. But is an exodus from academia a bad thing?"
from And Then There Was One, Science 19 September 2008: 1622-1628.

Repugnant transactions in Australia and England: GM crops

In many parts of the world, barriers have been raised to the sale of Genetically Modified (GM) crops.

In Australia, they were legislated against, and now that legislation looks likely to be repealed.
Science 19 September 2008:Vol. 321. no. 5896, p. 1629 reports:
"Four years ago, the governing Labor Party in Western Australia (WA), the country's breadbasket, banned growing GM crops in the state. But after elections last week, the Liberal and National parties formed a coalition that will oust Labor--and the Liberals have promised to rescind the GM moratorium."

In England, where GM crops aren't forbidden, Prince Charles has headed the opposition:
"The mass development of genetically modified crops risks causing the world's worst environmental disaster, The Prince of Wales has warned...
"The Prince, in an exclusive interview with the Daily Telegraph, also expressed the fear that food would run out because of the damage being wreaked on the earth's soil by scientists' research.
He accused firms of conducting a "gigantic experiment I think with nature and the whole of humanity which has gone seriously wrong".
"Why else are we facing all these challenges, climate change and everything?".
Relying on "gigantic corporations" for food, he said, would result in "absolute disaster".

Market for certificates of deposit

Do I Hear 4%? On This Site, Banks Bid for Your Cash

The NY Times article talks about Money Aisle, a site on which banks bid for your deposit.

In passing, the article also talks about competition for bank advertisements; at Moneyaisle, banks only pay for customers who open accounts, rather than a pay per click model.

Repugnant transactions in Saudi Arabia

I call a transaction 'repugnant' if some people want to engage in it, but others don't want them to. In Saudi Arabia these often involve religious views.
The NY Times report that the Turkish soap opera Noor is very popular among Saudi women, but not among clerics: Arab TV Tests Societies’ Limits With Depictions of Sex and Equality .
"That divided response was apparent this month when Sheik Luhaidan, the Saudi cleric, made his comment about killing the owners of satellite TV stations that broadcast indecent material.
His comments were quickly rebroadcast, and an uproar ensued. Critics across the ideological spectrum, including some hard-line Saudis, berated him as having crossed the line. Some of the television networks Sheik Luhaidan appeared to be referring to are owned, after all, by members of the Saudi royal family.
Sheik Luhaidan, who is chief justice of Saudi Arabia’s highest legal authority, the Supreme Judicial Council, is said to have been surprised by all the controversy.
A few days later, apparently under pressure from senior figures in the Saudi government, he appeared on state television to explain. He said he had not meant to encourage or condone the murder of station owners. Assuming other penalties do not deter them, he said, the owners should first be brought to trial and sentenced to death — and then they could be executed."

For some other, related examples, see
Saudi Arabia bans sale of dogs, cats in capital, and
Saudi Arabia bans all things red ahead of Valentine's Day.

However, as elsewhere, what transactions are repugnant can change over time, in both directions, and things formerly repugnant can become less so:
Saudi Women Can Now Stay in Hotels Alone