Who Gets What - And Why: The Hidden World of Matchmaking and Market Design

by Alvin E. Roth

the tension between commoditization and product differentiation — that is, between wanting to sell in a thick market to buyers even if they don’t care who you are, and trying to make your product special enough that many buyers will care enough about you to seek you out.

The thickness of the Amazon marketplace — the ready availability of so many buyers and sellers — is self-reinforcing.

Each of these ubiquitous marketplaces has found a way to succeed not only in making markets thick, uncongested, and safe, but also in making them simple to use.

In the case of kidney exchange, making the market thick involved assembling databases of patient-donor pairs. Dealing with congestion initially had to do with being able to schedule enough operating rooms at the same time, and now has to do with organizing chains. Making the market safe and simple continues to involve making it easy for hospitals to enroll all of their patient-donor pairs, so that the market will efficiently help as many patients as possible get transplants.

season unranked in one poll (meaning it wasn’t even in the top 25) and number 23 in the

Price competition among well-informed traders is one of the things that keep markets healthy.

because part of market design involves recognizing that good ideas may not be enough on their own to fix a market. It’s often also necessary to gather broad support from participants to get those ideas adopted and implemented.

Indeed, one of the long-standing arguments for legalizing drugs and prostitution is that outlawing these markets merely moves them into the unregulated and unsafe criminal world.

how to manage the flow of information. No matter how well a market is otherwise designed, it will have trouble giving people what they want if it doesn’t make it safe for them to try to get what they want.

“College Admissions and the Stability of Marriage.” The two authors didn’t know about the Match, but they formulated an algorithm for finding stable matchings that I later discovered was equivalent to the one the doctors had adopted for the 1952 clearinghouse. Gale and Shapley called their version the deferred acceptance algorithm, and it eventually became the most important strain of the Penicillium mold for fixing failed matching markets

all acceptances are deferred until the end, when no more offers are forthcoming.

It was attractive enough to students and hospitals to make the market thick, and it discouraged unraveling, since it was worth waiting for. It wasn’t congested, since it asked for decisions in advance and executed the process of finding the outcome of all those decisions quickly. And it made it safe for doctors to reveal their true preferences, a point I’ll explain in the next chapter.

Thus a beautiful tail advertises to the local peahens that this is a peacock with impressive genetic resources. (Evolutionary biologists refer to the “four Fs” of natural selection: feeding, fighting, fleeing, and, um, reproduction. A large tail is a “handicap” in the first three categories, which sends a signal about his underlying fitness, and that increases his opportunities in the fourth.)

“Remember that TIME is Money,” but it also includes the parallel advice “Remember that CREDIT is Money.”)

substantial monetary payments might prove coercive —“an offer you can’t refuse”— and leave poor people open to exploitation, from which they deserve protection.

that allowing things such as kidneys to be bought and paid for might start us on a slippery slope toward a less sympathetic society than we would like to live in. The concern, often not clearly articulated, is that monetizing certain transactions might not itself be objectionable but could ultimately cause other changes that we would regret. That slide might begin, for example, by reduced public enthusiasm for existing forms of support for the poor and vulnerable in ways that might make them feel that they needed to sell, say, a kidney.