Introduction To Market Design.2011
Introduction To Market Design.2011
Introduction To Market Design.2011
Assignment
Recommended texts
Roth, Alvin E. and Marilda Sotomayor Two-Sided
Matching: A Study in Game-Theoretic Modeling and
Analysis, Econometric Society Monograph Series,
Cambridge University Press, 1990. (get the paperback
edition.)
Milgrom, Paul "Putting Auction Theory to Work" by
Paul Milgrom (Churchill Lectures), Cambridge
University Press, 2004
Klemperer, Paul "Auctions: Theory and Practice"
(Toulouse Lectures), Princeton University Press, 2004.
Occasional lunches
After about half the class sessions (judging
from past experience), Peter and I will
announce that we are free for lunch
afterwards with anyone interested.
In past years weve normally walked over to
Finale in the Holyoke Center
Methodology
Responsibility for detail requires the ability to
deal with complex institutional features that may
be omitted from simple models.
Game theory, the part of economics that studies
the rules of the game, provides a framework
with which design issues can be addressed.
But dealing with complexity will require new
tools, to supplement the analytical toolbox of the
traditional theorist.
An analogy
Consider the design of suspension bridges. Their simple
physics, in which the only force is gravity, and all beams are
perfectly rigid, is simple, beautiful and indispensable.
But bridge design also concerns metal fatigue, soil
mechanics, and the sideways forces of waves and wind.
Many questions concerning these complications cant be
answered analytically, but must be explored using physical
or computational models.
Uncongested
Enough time for offers to be made, accepted, rejected
Safe
Safe to act straightforwardly on relevant preferences
Some examples
Kidney exchange (thickness, congestion, incentives)
New England and Ohio (2005)
National US (2010??)
Repugnant: monetary markets
12
Kidney exchange--background
There are 89,603 patients on the waiting list for
cadaver kidneys in the U.S. (as of 9/1/11)
In 2010 34,418 patients were added to the waiting list,
and 27,775 patients were removed from the list.
In 2010 there were 10,622 transplants of cadaver
kidneys performed in the U.S.
In the same year, 4,652 patients died while on the
waiting list (and more than 2,110 others were removed
from the list as Too Sick to Transplant.
In 2010 there were also 6,276 transplants of kidneys
from living donors in the US.
Sometimes donors are incompatible with their
intended recipient.
This opens the possibility of exchange .
13
Recipient 1
Blood type A
Blood type B
Donor 2
Recipient 2
Blood type B
Blood type A
14
4
15
21
Pair 1
Pair 4
Pair 2
Pair 3
22
Kidney overview
For kidney exchange, the big problem initially has
been establishing a thick market, and weve been
trying to do this while solving the new problems
concerning congestion and incentives that arise.
Some of these congestion problems involved the
logistics of surgery on the one hand, and the finding
of ways to reach the efficient frontier without
straining these logistics too much.
The initial strategic (incentive and equilibrium)
considerations we focused on involved individual
surgeons and their patients; now we are seeing
issues involving transplant centers as the players.
(Were scheduled to talk about kidney exchange and
related matters in detail late in the semester.)
23
25
Stage 3:
CENTRALIZED MARKET
CLEARING PROCEDURES
26
27
Stable matchings
A matching is
BLOCKED BY AN INDIVIDUAL k if k prefers being single to being
matched with (k), i.e.
k >k (k)
((k) is unacceptable).
BLOCKED BY A PAIR OF AGENTS (m,w) if they each prefer each
other to , i.e.
Stable matchings
A matching is
BLOCKED BY AN INDIVIDUAL k if k prefers being single to being
matched with (k), i.e.
k >k (k)
((k) is unacceptable).
BLOCKED BY A PAIR OF AGENTS (m,w) if they each prefer each
other to , i.e.
Market
Stable
NRMP
yes
Edinburgh ('69)
yes
Cardiff
yes
Birmingham
no
Edinburgh ('67)
no
Newcastle
no
Sheffield
no
Cambridge
no
London Hospital
no
Medical Specialties
yes
Canadian Lawyers
yes
Dental Residencies
yes
Osteopaths (< '94)
no
Osteopaths (> '94)
yes
Pharmacists
yes
Reform rabbis
yes (first used in 97-98)
Clinical psych
yes (first used in 99)
Lab experiments
(Kagel&Roth QJE 2000)
yes
no
yes.
no
32
36
Hematology (2006)
Hematology/Oncology (2006)
Infectious Disease (1986-1990; rejoined in 1994)
Oncology (2006)
Pulmonary and Critical Medicine (1986)
Rheumatology (2005)
Edinburgh (1969)
Cardiff (197x)
39
Homework exercise
Here is the web site of the American Association of Colleges
of Podiatric Medicine
http://www.casprcrip.org/html/casprcrip/students.asp
They run a match, and here is the description of their
algorithm:
http://www.casprcrip.org/html/casprcrip/pdf/MatchExpl.pdf
(this is also on the class web page)
Is their algorithm equivalent to the hospital proposing
deferred acceptance procedure?
Does it produce the same matching, when it produces a
matching?
Does it always (for every preference profile) produce a matching?
Is the description of the algorithm complete enough to be sure?