Alvin Roth

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pages: 350 words: 103,988

Reinventing the Bazaar: A Natural History of Markets by John McMillan

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accounting loophole / creative accounting, Albert Einstein, Alvin Roth, Andrei Shleifer, Anton Chekhov, Asian financial crisis, congestion charging, corporate governance, corporate raider, crony capitalism, Dava Sobel, Deng Xiaoping, experimental economics, experimental subject, fear of failure, first-price auction, frictionless, frictionless market, George Akerlof, George Gilder, global village, Hernando de Soto, I think there is a world market for maybe five computers, income inequality, income per capita, informal economy, information asymmetry, invisible hand, Isaac Newton, job-hopping, John Harrison: Longitude, John von Neumann, Kenneth Arrow, land reform, lone genius, manufacturing employment, market clearing, market design, market friction, market microstructure, means of production, Network effects, new economy, offshore financial centre, ought to be enough for anybody, pez dispenser, pre–internet, price mechanism, profit maximization, profit motive, proxy bid, purchasing power parity, Ronald Coase, Ronald Reagan, sealed-bid auction, second-price auction, Silicon Valley, spectrum auction, Stewart Brand, The Market for Lemons, The Nature of the Firm, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, War on Poverty, Xiaogang Anhui farmers, yield management

“Labor Markets in Professional Sports.” Economic Journal 111, 47–68. Roth, Alvin E. 1984. “The Evolution of the Labor Market for Medical Interns and Residents.” Journal of Political Economy 92, 991–1016. ————. 1996. “Report on the Design and Testing of an Applicant Proposing Matching Algorithm, and Comparison with the Existing NPRM Algorithm.” www.economics.harvard.edu/~aroth/phase1.html. Roth, Alvin E., and Ockenfels, Axel. 2000. “Last Minute Bidding and the Rules for Ending Second-Price Auctions.” Unpublished, Harvard University, Cambridge. Roth, Alvin E., and Peranson, Elliot. 1999. “A Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design.”

A hospital and an intern reaching an early deal did not take account of the costs they were imposing on the other hospitals and interns. A hospital that decided to wait and see how candidates developed risked losing them to other hospitals. The hospitals eventually designed some rules for the marketplace, with the help of economist Alvin Roth.15 Now, each intern is given a list of hospitals and ranks them in order of preference. Similarly, each hospital ranks the interns. These rankings are loaded into a computer program, which computes the match of interns to hospitals, going as far as is feasible toward meeting the preferences of both the interns and the hospitals.

“A Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design.” American Economic Review 89, 748–780. Roth, Alvin E., Prasnikar, Vesna, Okuno-Fujiwara, Masahiro, and Zamir, Shmuel. 1991. “Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study.” American Economic Review 81, 1068–1095. Rothschild, Michael, and Stiglitz, Joseph E. 1976. “Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information.” Quarterly Journal of Economics 90, 629–650. Rozelle, Scott, Zhang, Linxiu, and Huang, Jikun. 1999.


pages: 500 words: 145,005

Misbehaving: The Making of Behavioral Economics by Richard H. Thaler

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3Com Palm IPO, Albert Einstein, Alvin Roth, Amazon Mechanical Turk, Andrei Shleifer, Apple's 1984 Super Bowl advert, Atul Gawande, Berlin Wall, Bernie Madoff, Black-Scholes formula, capital asset pricing model, Cass Sunstein, Checklist Manifesto, choice architecture, clean water, cognitive dissonance, conceptual framework, constrained optimization, Daniel Kahneman / Amos Tversky, delayed gratification, diversification, diversified portfolio, Edward Glaeser, endowment effect, equity premium, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, George Akerlof, hindsight bias, Home mortgage interest deduction, impulse control, index fund, information asymmetry, invisible hand, Jean Tirole, John Nash: game theory, John von Neumann, Kenneth Arrow, late fees, law of one price, libertarian paternalism, Long Term Capital Management, loss aversion, market clearing, Mason jar, mental accounting, meta analysis, meta-analysis, money market fund, More Guns, Less Crime, mortgage debt, Myron Scholes, Nash equilibrium, Nate Silver, New Journalism, nudge unit, Paul Samuelson, payday loans, Ponzi scheme, presumed consent, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, random walk, randomized controlled trial, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Silicon Valley, South Sea Bubble, statistical model, Steve Jobs, technology bubble, The Chicago School, The Myth of the Rational Market, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, transaction costs, ultimatum game, Vilfredo Pareto, Walter Mischel, zero-sum game

Most European countries (as well as Canada) provide health care to their citizens as a basic right, and even in America, where this view is resisted in certain quarters, we do not turn uninsured accident victims away at the emergency room. Similarly, no country permits a free market in organs, although Iran does have a market for kidneys. For most of the world, the idea that a rich person who needs a kidney should be allowed to pay a poor person to donate one is considered “repugnant,” to use the word favored by economist Alvin Roth to describe such market transactions. In many situations, the perceived fairness of an action depends not only on who it helps or harms, but also on how it is framed. To test these kinds of effects, we would ask two versions of a question to different groups of respondents. For example, consider this pair of questions, with the differences highlighted in italics: A shortage has developed for a popular model of automobile, and customers must now wait two months for delivery.

Economists need to adopt as nuanced a view of human nature as the farmers. Not everyone will free ride all the time, but some people are ready to pick your pocket if you are not careful. I keep a photograph of one of those farm stands in my office for inspiration. 16 Mugs At some point during the Vancouver year, the economist Alvin Roth, who was then deeply involved with experimental methods, organized a conference at the University of Pittsburgh. The goal was to present the first drafts of papers that would later be published in a small book called Laboratory Experimentation in Economics: Six Points of View. The contributors were major figures in the experimental economics community including Al, Vernon Smith, and Charlie Plott.

Evidence from Professional Football.” Journal of Political Economy 114, no. 2: 340–65. Ross, Lee, David Greene, and Pamela House. 1977. “The ‘False Consensus Effect’: An Egocentric Bias in Social Perception and Attribution Processes.” Journal of Experimental Social Psychology 13, no. 3: 279–301. Roth, Alvin E. 2007. “Repugnance as a Constraint on Markets.” Journal of Economic Perspectives 21, no. 3: 37–58. ———, ed. 1987. Laboratory Experimentation in Economics: Six Points of View. Cambridge, UK: Cambridge University Press. Rozeff, Michael S., and William Kinney. 1976. “Capital Market Seasonality: The Case of Stock Returns.”


pages: 421 words: 110,406

Platform Revolution: How Networked Markets Are Transforming the Economy--And How to Make Them Work for You by Sangeet Paul Choudary, Marshall W. van Alstyne, Geoffrey G. Parker

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3D printing, Affordable Care Act / Obamacare, Airbnb, Alvin Roth, Amazon Mechanical Turk, Amazon Web Services, Andrei Shleifer, Apple's 1984 Super Bowl advert, autonomous vehicles, barriers to entry, big data - Walmart - Pop Tarts, bitcoin, blockchain, business process, buy low sell high, chief data officer, Chuck Templeton: OpenTable, clean water, cloud computing, connected car, corporate governance, crowdsourcing, data acquisition, data is the new oil, digital map, discounted cash flows, disintermediation, Edward Glaeser, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, financial innovation, Haber-Bosch Process, High speed trading, information asymmetry, Internet of things, inventory management, invisible hand, Jean Tirole, Jeff Bezos, jimmy wales, John Markoff, Khan Academy, Kickstarter, Lean Startup, Lyft, Marc Andreessen, market design, Metcalfe’s law, multi-sided market, Network effects, new economy, payday loans, peer-to-peer lending, Peter Thiel, pets.com, pre–internet, price mechanism, recommendation engine, RFID, Richard Stallman, ride hailing / ride sharing, Robert Metcalfe, Ronald Coase, Satoshi Nakamoto, self-driving car, shareholder value, sharing economy, side project, Silicon Valley, Skype, smart contracts, smart grid, Snapchat, software is eating the world, Steve Jobs, TaskRabbit, The Chicago School, the payments system, Tim Cook: Apple, transaction costs, two-sided market, Uber and Lyft, Uber for X, winner-take-all economy, zero-sum game, Zipcar

These are endemic in network markets, since, as we’ve seen when examining network effects, the spillover benefits users generate are a source of platform value. Understanding this forces a shift in corporate governance from a narrow focus on shareholder value to a broader view of stakeholder value. Market designer and Nobel Prize-winning economist Alvin Roth described a model of governance that uses four broad levers to address market failures.19 According to Roth, a well-designed market increases the safety of the market via transparency, quality, or insurance, thereby enabling good interactions to occur. It provides thickness, which enables participants from different sides of a multisided market to find one another more easily.

Zopa responded by publicizing the fact that its loan default rate had fallen to 0.2 percent from 0.6 percent three years earlier.34 Such is the power of well-designed platform architecture. Architecture can also be used to prevent and correct market failures. Recall the middlemen on eBay who took advantage of seller misspellings. Although one might lament the lost opportunity for the hapless sellers to complete the deal, these middlemen provided market liquidity (“thickness” in Alvin Roth’s formulation) through the process known as arbitrage. If no one bids on misspelled items, the interaction never happens—so arbitrageurs can be viewed as providing a valuable service. Yet the existence of arbitrage opportunities also highlights market inefficiencies. eBay now uses automated systems to provide spelling assistance, so sellers can have more confidence that they’ll receive what their items are worth.

., 245–46 rate of conversion to sale, 197 ratings, 157–58, 265 razors-and-blades strategy, 109–10 Real Audio, 222 real estate market, 9, 12, 62, 124, 237, 277, 282 RealNetworks, 222 real-time processing, 247, 252–53 recipients, 100, 101, 104, 105 recruiters, 50, 51, 119, 218–19 redBus, 73, 95 Reddit, 5, 36, 47, 93, 173 Regulation 2.0, 253–56 regulatory capture, 235–37, 257 RelayRides, 9, 10, 67, 230 research and development (R & D), 14, 33, 275 reservations, 8–9, 90, 95, 101, 137, 142, 194 resources: allocation of, 6, 15, 70–71, 199, 200, 298–99 control of, 208–9, 212, 227 intensive use of, 263–64, 278, 289 model based on, 208–10, 213, 216 restaurants, 36, 37, 76, 90, 91, 95, 101, 113, 120, 142, 170, 194, 259 retail industry, 12, 63, 77, 82–83, 85, 89, 111, 123–24, 141, 145, 157–58, 204–7, 240–49, 251, 264 revenue grabs, 121, 157–58 rewards (incentives), 82, 101, 102, 166, 173–74, 182, 227 R/GA, 76 ride-sharing services, 2, 9, 12, 16–18, 25, 30, 36, 37, 49–50, 60–62, 67, 115, 175, 190, 227, 231, 233, 250–54, 258–59, 264, 278, 287, 297 Ries, Eric, 199, 201–2 Rifkin, Jeremy, 286 Roman military campaigns, 183, 237 Roth, Alvin, 164, 171 royalties, 72, 122 Rudder, Christian, 26–27 Sacks, David, 17, 18 Safaricom, 277–78 safety net, 280–81, 288 Saks Fifth Avenue, 275 sales conversion rate, 191–92 Salesforce, x, 55, 145, 245–46, 267 sales forces, 42–44, 73–74, 91, 125, 145 sales tax, 248–49 same-side effects, 29–32, 34, 298 Samsung, xi, 86, 137, 270–71, 295 San Francisco, 1–2, 18, 61, 233, 278, 281–83 SAP, vii, x, 155, 173–75, 216, 219, 241 scrapers (automated software), 91–92, 107 search engine optimization, 120–21, 145, 191, 297 search engines, 24–25, 40, 120–21, 145, 190, 191, 197–98, 215, 216, 242, 297 Sears, Roebuck, 207 seeding strategy, 18, 92–93, 105 self-driving cars, 62 self-governance, 176–80, 182, 246, 253–56 self-serve advertising, 131, 133–34 semiconductor industry, 225 senders, 100, 101–2, 105 sensor data, 246, 286 service interfaces, 176–78, 221 Shapiro, Carl, 19, 240–41 shared model, 137, 138, 140–41, 154–55 shareholders, 11, 164 sharing economy, 10, 298–99 Shleifer, Andrei, 236–37, 238 shopping malls, 123–24 ShopRunner, 206–7 ShopThis!


pages: 287 words: 82,576

The Complacent Class: The Self-Defeating Quest for the American Dream by Tyler Cowen

affirmative action, Affordable Care Act / Obamacare, Airbnb, Alvin Roth, assortative mating, Bernie Sanders, Black Swan, business climate, circulation of elites, clean water, David Graeber, declining real wages, deindustrialization, desegregation, Donald Trump, drone strike, East Village, Elon Musk, Ferguson, Missouri, Francis Fukuyama: the end of history, gig economy, Google Glasses, Hyman Minsky, Hyperloop, income inequality, intangible asset, Internet of things, inventory management, knowledge worker, labor-force participation, labour mobility, low skilled workers, Marc Andreessen, Mark Zuckerberg, medical residency, meta analysis, meta-analysis, obamacare, offshore financial centre, Paul Samuelson, Peter Thiel, purchasing power parity, Richard Florida, security theater, sharing economy, Silicon Valley, Silicon Valley ideology, Skype, South China Sea, Steven Pinker, Stuxnet, The Great Moderation, total factor productivity, Tyler Cowen: Great Stagnation, upwardly mobile, Vilfredo Pareto, working-age population, World Values Survey

Matching probably has improved in the middle tiers of the market and at the bottom, even if not many people can be matched to the very top in terms of quality. There is some evidence that patients are better matched to their hospitals over time, and in a way that is bringing slight improvements in life expectancy.19 Some of the benefits from better matching in health care and education are not apparent at first glance. Alvin Roth, an experimental economist now at Stanford University, won a Nobel Prize in part for using economic theory to come up with better algorithms for matching, and these methods are supposed to be robust across many realms in a quite general sense. His Nobel Prize was an especially deserved one, as it reflects the spirit of our times more than was recognized in 2012, the year he won.

See Affordable Care Act Occupy Wall Street movement oil industry oil price shock (1973) On the Road (Kerouac) outsourcing pantheism Pareto, Vilfredo patents Patriot Act pets philanthropy Pinker, Steven Pissarides, Christopher play, outdoor polarization policing political science poverty and mobility and segregation Princeton University prison riots productivity and cities diffusion problem firm-specific productivity and innovation and the internet and matching and mobility productivity per worker hour total factor productivity (TFP) worker productivity profiling progress and the Complacent Class and democracy and innovation and mobility model of history and segregation progressivism protests. See social protests and riots Putin, Vladimir Putnam, Robert D. R&D (research and development) race relations racism Rauch, Jonathan Reagan, Ronald Reformation, Protestant regional specialization Republican Party riots. See social protests and riots Roeder, Oliver Roth, Alvin Russia. See also Soviet Union S&P 500 safety and security Samuelson, Paul Sanders, Bernie Schwartz, Barry Second World War security. See safety and security segregation and college towns by education and culture by income and matching by race by social class Seinfeld (sit-com) Selma to Montgomery marches September 11, 2001 sexuality.


pages: 288 words: 16,556

Finance and the Good Society by Robert J. Shiller

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Alvin Roth, bank run, banking crisis, barriers to entry, Bernie Madoff, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, cognitive dissonance, collateralized debt obligation, collective bargaining, computer age, corporate governance, Daniel Kahneman / Amos Tversky, Deng Xiaoping, diversification, diversified portfolio, Donald Trump, Edward Glaeser, eurozone crisis, experimental economics, financial innovation, financial thriller, fixed income, full employment, fundamental attribution error, George Akerlof, income inequality, information asymmetry, invisible hand, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, land reform, loss aversion, Louis Bachelier, Mahatma Gandhi, Mark Zuckerberg, market bubble, market design, means of production, microcredit, moral hazard, mortgage debt, Myron Scholes, Occupy movement, passive investing, Ponzi scheme, prediction markets, profit maximization, quantitative easing, random walk, regulatory arbitrage, Richard Thaler, Right to Buy, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, selection bias, self-driving car, shareholder value, Sharpe ratio, short selling, Simon Kuznets, Skype, Steven Pinker, telemarketer, The Market for Lemons, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, Vanguard fund, young professional, zero-sum game, Zipcar

In so doing they are humanizing nance and making it more relevant to human welfare. Sometimes these people are called nancial engineers, since what they do seems analogous to what mechanical or electrical engineers do. At their best, market designers have the same practical common sense and drive to create, and the same grasp of basic science, that successful engineers have. Alvin Roth is a professor specializing in market design in the Economics Department at Harvard University. One of his most notable achievements was constructing a simple market for kidney transplants. Many thousands of people in need of a transplant die each year for failure to nd a suitable donor. The problem has been that few people would volunteer to donate a kidney: the operation is painful and the result may pose complications.

“The Evolutionary Psychology of Facial Beauty.” Annual Review of Psychology 57:199–226. Ross, Lee. 1977. “The Intuitive Psychologist and His Shortcomings: Distortions in the Attribution Process.” Advances in Experimental Social Psychology 10:173–220. Ross, Stephen A. 1976. “Options and E ciency.” Quarterly Journal of Economics 90(1):75–89. Roth, Alvin E., Tayfun Sonmez, and M. Utku Unver. 2005. “Pairwise Kidney Exchange.” Journal of Economic Theory 125(2):151–88. Russett, Bruce, and John Oneal. 2001. Triangulating Peace: Democracy, Interdependence and International Organizations. New York: W. W. Norton. Saint-Exupéry, Antoine de. 2000 [1943].

See also speculation Ritschl, Albrecht, 158 RMBSs. See residential mortgage–backed securities Rockefeller, John D., Sr., 105, 164–65 Rockefeller family, 164–65 Rogoff, Kenneth, 2 Rome, ancient, 39, 144, 147, 178 Romney, George, 22 Roosevelt, Franklin D., 109, 202, 210, 212–13, 233–34 Roosevelt family, 234, 256n7 Ross, Stephen A., 78 Roth, Alvin, 69–70 Rubin, Jerry, 137–38 Russett, Bruce, 228–29 Russia: dating services, 74; economic change in, 2, 3; perceptions of businesspeople, 166. See also Soviet Union Saint-Exupéry, Antoine de, The Little Prince, 124–25 salaries. See executive compensation; rewards salespeople, financial, 80, 85, 97, 235 Samuelson, Paul A., 185 Sarkozy, Nicolas, 2 Saverin, Eduardo, 49 Save the Children, 200 savings: encouraging, 214; lottery-linked, 177; rates of, 153–54; retirement, 214 savings banks, 44 SBA.


pages: 353 words: 98,267

The Price of Everything: And the Hidden Logic of Value by Eduardo Porter

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Alvin Roth, Asian financial crisis, Ayatollah Khomeini, banking crisis, barriers to entry, Berlin Wall, British Empire, capital controls, Carmen Reinhart, Cass Sunstein, clean water, Credit Default Swap, Deng Xiaoping, Edward Glaeser, European colonialism, Fall of the Berlin Wall, financial deregulation, Ford paid five dollars a day, full employment, George Akerlof, Gordon Gekko, guest worker program, happiness index / gross national happiness, housing crisis, illegal immigration, immigration reform, income inequality, income per capita, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, John Maynard Keynes: technological unemployment, Joshua Gans and Andrew Leigh, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, loss aversion, low skilled workers, Martin Wolf, means of production, Menlo Park, Mexican peso crisis / tequila crisis, new economy, New Urbanism, peer-to-peer, pension reform, Peter Singer: altruism, pets.com, placebo effect, price discrimination, price stability, rent-seeking, Richard Thaler, rising living standards, risk tolerance, Robert Shiller, Robert Shiller, Ronald Reagan, Silicon Valley, stem cell, Steve Jobs, Stewart Brand, superstar cities, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade route, transatlantic slave trade, transatlantic slave trade, ultimatum game, unpaid internship, urban planning, Veblen good, women in the workforce, World Values Survey, Yom Kippur War, young professional, zero-sum game

The discussion about attitudes toward egg donations draws from the Ethics Committee of the American Society for Reproductive Medicine, “Financial Compensation of Oocyte Donors,” Fertility and Sterility, Vol. 88, No. 2, August 2007, pp. 305-309; David Tuller, “Payment Offers to Egg Donors Prompt Scrutiny,” New York Times, May 10, 2010; United Kingdom Human Fertilization and Embryology Authority, “Egg Donation and Egg Sharing” (at www.hfea.gov.uk/egg-donation-and-egg-sharing.html. , accessed 07/18/2010); and Alvin Roth, op. cit. The discussion about opposition to dwarf tossing in France comes from Alvin Roth, op. cit. Brigitte Bardot’s campaign against Koreans’ taste for dog meat is discussed in William Saletan, “Wok the Dog,” Slate, January 16, 2002. Data on kidney transplants are found in Scientific Registry of Transplant Recipients (at www.ustransplant.org/csr/current/nationalViewer.aspx?

Data on tipping patterns in the United States come from Daniel Kahneman, Jack Knetsch, and Richard Thaler, “Fairness as a Constraint on Profit Seeking: Entitlements in the Market,” American Economic Review, Vol. 76, September 1986, pp. 728-741; and Michael Lynn, “Tipping in Restaurants and Around the Globe: An Interdisciplinary Review,” in Morris Altman, ed., Handbook of Contemporary Behavioral Economics, Foundations and Developments (Armonk, N.Y.: M .E. Sharpe Publishers, 2006), pp. 626-643. 173-177 The Price of Repugnance: Discussion on different attitudes about eating horse fillet are drawn from Alvin Roth, “Repugnance as a Constraint on Markets,” Journal of Economic Perspectives, Vol. 21, No. 3, Summer 2007, pp. 37-58; maville.com, Caen et ça region (at www.caen.maville.com/actu/actudet_-Cyril-ouvre-une-boucherie-chevaline-boulevard-Leroy-_loc-822159_actu.htm, accessed 07/18/2010); and Tara Burghart, “Last US Horse Slaughterhouse to Close,” Huffington Post, June 29, 2007 (www.huffingtonpost.com/huff-wires/20070629/horse-slaughter/#, accessed 07/18/2010).


pages: 209 words: 13,138

Empirical Market Microstructure: The Institutions, Economics and Econometrics of Securities Trading by Joel Hasbrouck

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Alvin Roth, barriers to entry, conceptual framework, correlation coefficient, discrete time, disintermediation, distributed generation, experimental economics, financial intermediation, index arbitrage, information asymmetry, interest rate swap, inventory management, market clearing, market design, market friction, market microstructure, martingale, price discovery process, price discrimination, quantitative trading / quantitative finance, random walk, Richard Thaler, second-price auction, selection bias, short selling, statistical model, stochastic process, stochastic volatility, transaction costs, two-sided market, ultimatum game, zero-sum game

Ronen, Tavy, 1998, Trading structure and overnight information: A natural experiment from the Tel-Aviv Stock Exchange, Journal of Banking and Finance 22, 489–512. Ross, Sheldon M., 1996, Stochastic Processes (John Wiley, New York). Roth, Alvin E., 1995, Bargaining experiments, in John H. Kagel, and Alvin E. Roth, eds., The Handbook of Experimental Economics (Princeton University Press, Princeton, NJ). Roth, Alvin E., and Axel Ockenfels, 2002, Last-minute bidding and the rules for ending second-price auctions: Evidence from eBay and Amazon auctions on the internet, American Economic Review 92, 1093–103. Rubinstein, Ariel, 1982, Perfect equilibrium in a bargaining model, Econometrica 50, 97–110.


pages: 252 words: 73,131

The Inner Lives of Markets: How People Shape Them—And They Shape Us by Tim Sullivan

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Airbnb, airport security, Al Roth, Alvin Roth, Andrei Shleifer, attribution theory, autonomous vehicles, barriers to entry, Brownian motion, centralized clearinghouse, Chuck Templeton: OpenTable, clean water, conceptual framework, constrained optimization, continuous double auction, creative destruction, deferred acceptance, Donald Trump, Edward Glaeser, experimental subject, first-price auction, framing effect, frictionless, fundamental attribution error, George Akerlof, Goldman Sachs: Vampire Squid, Gunnar Myrdal, helicopter parent, information asymmetry, Internet of things, invisible hand, Isaac Newton, iterative process, Jean Tirole, Jeff Bezos, Johann Wolfgang von Goethe, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Arrow, late fees, linear programming, Lyft, market clearing, market design, market friction, medical residency, multi-sided market, mutually assured destruction, Nash equilibrium, Occupy movement, Pareto efficiency, Paul Samuelson, Peter Thiel, pets.com, pez dispenser, pre–internet, price mechanism, price stability, prisoner's dilemma, profit motive, proxy bid, RAND corporation, ride hailing / ride sharing, Robert Shiller, Robert Shiller, Ronald Coase, school choice, school vouchers, sealed-bid auction, second-price auction, second-price sealed-bid, sharing economy, Silicon Valley, spectrum auction, Steve Jobs, Tacoma Narrows Bridge, technoutopianism, telemarketer, The Market for Lemons, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, transaction costs, two-sided market, uranium enrichment, Vickrey auction, Vilfredo Pareto, winner-take-all economy

“In the Great Web Bazaar,” The Economist, February 24, 2000, http://www.economist.com/node/285614; Robert Hall, Digital Dealing: How E-Markets Are Transforming the Economy (New York: W. W. Norton, 2002). 10. Recall in Chapter 4 that we looked at how eBay sellers experimented with bundling listings with charitable donations. 11. Economists have come up with a number of explanations for this end-of-auction “sniping.” For example, a paper by Alvin Roth and Axel Ockenfels argues that bidders learn about what an item is worth during the bidding process. The “snipers” wait to see how others value a listing before swooping in at the last moment to put in a slightly higher bid. Alvin E. Roth and Axel Ockenfels, “Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet,” American Economic Review 92, no. 4 (2002): 1093–1103. 12.


pages: 383 words: 81,118

Matchmakers: The New Economics of Multisided Platforms by David S. Evans, Richard Schmalensee

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Airbnb, Alvin Roth, big-box store, business process, cashless society, Chuck Templeton: OpenTable, creative destruction, Deng Xiaoping, if you build it, they will come, information asymmetry, Internet Archive, invention of movable type, invention of the printing press, invention of the telegraph, invention of the telephone, Jean Tirole, John Markoff, Lyft, M-Pesa, market friction, market microstructure, mobile money, multi-sided market, Network effects, Productivity paradox, profit maximization, purchasing power parity, QR code, ride hailing / ride sharing, sharing economy, Silicon Valley, Snapchat, Steve Jobs, Tim Cook: Apple, transaction costs, two-sided market, Uber for X, Victor Gruen, winner-take-all economy

Another plausible explanation, however, is that these platforms restrict entry in order to raise the level of quality and prevent a lemons problem. 12. In economist-speak, this is a negative direct network effect. 13. These are positive direct network effects. 14. For a discussion of the role of congestion and the speed of making transactions, see Alvin Roth, Who Gets What and Why (New York: Houghton Mifflin Harcourt, 2015). 15. Eye-tracking studies of how consumers use search engines reveal that both the quality of the consumer experience and the attention paid to advertising varies substantially with the layout and organization of the search results page.


pages: 324 words: 93,175

The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home by Dan Ariely

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Alvin Roth, assortative mating, Burning Man, business process, cognitive dissonance, corporate governance, Daniel Kahneman / Amos Tversky, end world poverty, endowment effect, Exxon Valdez, first-price auction, Frederick Winslow Taylor, George Akerlof, happiness index / gross national happiness, Jean Tirole, job satisfaction, knowledge economy, knowledge worker, loss aversion, Peter Singer: altruism, placebo effect, Richard Thaler, Saturday Night Live, second-price auction, software as a service, The Wealth of Nations by Adam Smith, ultimatum game, Upton Sinclair, young professional

Chapter 11: Lessons from Our Irrationalities: Why We Need to Test Everything Additional readings Colin Camerer and Robin Hogarth, “The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework,” Journal of Risk and Uncertainty 19, no. 1 (1999): 7–42. Robert Slonim and Alvin Roth, “Learning in High Stakes Ultimatum Games: An Experiment in the Slovak Republic,” Econometrica 66, no. 3 (1998): 569–596. Richard Thaler, “Toward a Positive Theory of Consumer Choice,” Journal of Economic Behavior and Organization 1, no. 1 (1980): 39–60. Index The pagination of this electronic edition does not match the edition from which it was created.


pages: 898 words: 266,274

The Irrational Bundle by Dan Ariely

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accounting loophole / creative accounting, air freight, Albert Einstein, Alvin Roth, assortative mating, banking crisis, Bernie Madoff, Black Swan, Broken windows theory, Burning Man, business process, cashless society, Cass Sunstein, clean water, cognitive dissonance, computer vision, corporate governance, credit crunch, Credit Default Swap, Daniel Kahneman / Amos Tversky, delayed gratification, Donald Trump, end world poverty, endowment effect, Exxon Valdez, first-price auction, Frederick Winslow Taylor, fudge factor, George Akerlof, Gordon Gekko, greed is good, happiness index / gross national happiness, Jean Tirole, job satisfaction, Kenneth Arrow, knowledge economy, knowledge worker, lake wobegon effect, late fees, loss aversion, Murray Gell-Mann, new economy, Peter Singer: altruism, placebo effect, price anchoring, Richard Feynman, Richard Feynman, Richard Thaler, Saturday Night Live, Schrödinger's Cat, second-price auction, shareholder value, Silicon Valley, Skype, software as a service, Steve Jobs, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, ultimatum game, Upton Sinclair, Walter Mischel, young professional

The hallmark of an Ariely experiment is that it uses an innovative experimental design to make an unusual point. His work covers a wide range of factors that affect human decision-making, from the usual suspects, inattention and confusion and myopia, to less studied issues like pain and lust.” —Alvin Roth, Professor of Economics and Business Administration, Harvard University “Dan is full of passion for life in general, which is also apparent in his writing and research. Dan’s research is very broad, covering many aspects and implications for the new field of behavioral economics. This includes the psychology of consumers, employees, and investors, crossing topics from dating to dishonesty.

Chapter 11: Lessons from Our Irrationalities: Why We Need to Test Everything Additional readings Colin Camerer and Robin Hogarth, “The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework,” Journal of Risk and Uncertainty 19, no. 1 (1999): 7–42. Robert Slonim and Alvin Roth, “Learning in High Stakes Ultimatum Games: An Experiment in the Slovak Republic,” Econometrica 66, no. 3 (1998): 569–596. Richard Thaler, “Toward a Positive Theory of Consumer Choice,” Journal of Economic Behavior and Organization 1, no. 1 (1980): 39–60. Index The pagination of this electronic edition does not match the edition from which it was created.


pages: 415 words: 125,089

Against the Gods: The Remarkable Story of Risk by Peter L. Bernstein

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Albert Einstein, Alvin Roth, Andrew Wiles, Antoine Gombaud: Chevalier de Méré, Bayesian statistics, Big bang: deregulation of the City of London, Bretton Woods, buttonwood tree, capital asset pricing model, cognitive dissonance, computerized trading, Daniel Kahneman / Amos Tversky, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Lloyd's coffeehouse, endowment effect, experimental economics, fear of failure, Fellow of the Royal Society, Fermat's Last Theorem, financial deregulation, financial innovation, full employment, index fund, invention of movable type, Isaac Newton, John Nash: game theory, John von Neumann, Kenneth Arrow, linear programming, loss aversion, Louis Bachelier, mental accounting, moral hazard, Myron Scholes, Nash equilibrium, Paul Samuelson, Philip Mirowski, probability theory / Blaise Pascal / Pierre de Fermat, random walk, Richard Thaler, Robert Shiller, Robert Shiller, spectrum auction, statistical model, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, Thomas Bayes, trade route, transaction costs, tulip mania, Vanguard fund, zero-sum game

De Moivre first conceived of the bell curve by writing equations on a piece of paper, not, like Quetelet, by measuring the dimensions of soldiers. But Galton conceived of regression to the mean-a powerful concept that makes the bell curve operational in many instances-by studying sweetpeas and generational change in human beings; he came up with the theory after looking at the facts. Alvin Roth, an expert on experimental economics, has observed that Nicholas Bernoulli conducted the first known psychological experiment more than 250 years ago: he proposed the coin-tossing game between Peter and Paul that guided his uncle Daniel to the discovery of utility.26 Experiments conducted by von Neumann and Morgenstern led them to conclude that the results "are not so good as might be hoped, but their general direction is correct."'-' The progression from experiment to theory has a distinguished and respectable history.


pages: 515 words: 132,295

Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar

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3D printing, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, algorithmic trading, Alvin Roth, Asian financial crisis, asset allocation, bank run, Basel III, bonus culture, Bretton Woods, British Empire, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, commoditize, computerized trading, corporate governance, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial intermediation, Frederick Winslow Taylor, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, information asymmetry, interest rate derivative, interest rate swap, Internet of things, invisible hand, John Markoff, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, knowledge economy, labor-force participation, labour mobility, London Whale, Long Term Capital Management, manufacturing employment, market design, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, Paul Samuelson, pensions crisis, Ponzi scheme, principal–agent problem, quantitative easing, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, Satyajit Das, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, sovereign wealth fund, Steve Jobs, technology bubble, The Chicago School, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund, zero-sum game

Princeton, NJ: Princeton University Press, 2010. Reich, Robert B. Supercapitalism: The Transformation of Business, Democracy, and Everyday Life. New York: Alfred A. Knopf, 2007. Reinhart, Carmen M., and Kenneth S. Rogoff. This Time Is Different: Eight Centuries of Financial Folly. Princeton, NJ: Princeton University Press, 2009. Roth, Alvin E. Who Gets What—and Why: The New Economics of Matchmaking and Market Design. Boston: Houghton Mifflin Harcourt, 2015. Rothkopf, David. Power, Inc.: The Epic Rivalry Between Big Business and Government—and the Reckoning That Lies Ahead. New York: Farrar, Straus and Giroux, 2012. Saval, Nikil.


pages: 662 words: 180,546

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown by Philip Mirowski

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Alvin Roth, Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, Bretton Woods, Brownian motion, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, full employment, George Akerlof, Goldman Sachs: Vampire Squid, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, information asymmetry, invisible hand, Jean Tirole, joint-stock company, Kenneth Arrow, Kenneth Rogoff, knowledge economy, l'esprit de l'escalier, labor-force participation, liberal capitalism, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, Pareto efficiency, Paul Samuelson, payday loans, Philip Mirowski, Ponzi scheme, precariat, prediction markets, price mechanism, profit motive, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, school choice, sealed-bid auction, Silicon Valley, South Sea Bubble, Steven Levy, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Vilfredo Pareto, War on Poverty, Washington Consensus, We are the 99%, working poor

Ausubel and Cramton (“No Substitute for the ‘P’-Word in Financial Rescue,” p. 1) repeat the “suitcase approach” charge. 137 “Complicated Reverse Auction May Aid in Bailout,” NPR, October 10, 2008. 138 Ausubel and Cramton, “A Troubled Asset Reverse Auction,” p. 10. 139 And, indeed, the studies that Ausubel and Cramton draw upon to get their 97 percent figure (Kagel and Levin, “Implementing Efficient Multi-Object Auction Institutions”) provided experimental treatments of private value auctions. 140 Matthew Philips, “Gaming the Financial System,” Newsweek, November 18, 2008, available at www.thedailybeast.com/newsweek/2008/11/17/gaming-the-financial-system.html. 141 Lawrence Ausubel and Peter Cramton, “Auction Design for the Rescue Plan,” presentation dated October 5, 2008, available at www.cramton.umd.edu/papers2005-2009/ausubel-cramton-auction-for-rescue-plan-slides.pdf (accessed March 6, 2012). 142 Nik-Khah, “A Tale of Two Auctions.” 143 Cramton, “Auctioning the Digital Dividend,” p. 1. 144 “The Credit Crisis and Market Design,” Alvin Roth’s Market Design Blog, January 3, 2009, at http://marketdesigner.blogspot.com/2009/01/credit-crisis-and-market-design.html. 145 Cramton, “Market Design,” p. 2. 146 Session on “Research Funding for Economists.” See www.etnpconferences.net/sea/seaarchive/sea2011/User/Program.php?TimeSlot=4#Session11. 147 Prasch, “After the Crash of 2008,” p. 161. 148 Sorkin, Too Big to Fail, pp. 227–29; Calomiris and Wallison, “Blame Fannie Mae and Congress for the Credit Mess.” 149 Krugman, “Fannie, Freddie and You.” 150 White, “The Federal Reserve System’s Influence on Research in Monetary Economics”; Wallison, see all; Congleton, “On the Political Economy of the Financial Crisis and Bailout 2008–9”; Calabria, “Fannie, Freddie and the Subprime Mortgage Market”; Pinto, “ACORN and the Housing Bubble”; Paybarah, “Bloomberg: Plain and Simple.” 151 Nocera, “The Big Lie.” 152 For the best examples, consult Engel and McCoy, The Subprime Virus; Muolo and Padilla, Chain of Blame; Fligstein and Goldstein, “A Long Strange Trip”; Avery and Brevoort, “The Subprime Crisis”; Madrick and Partnoy, “Did Fannie Cause the Disaster?”