Market Design: Theory and Practice

Paper Session

Friday, Jan. 6, 2017 10:15 AM – 12:15 PM

Swissotel Chicago, Zurich A
Hosted By: American Economic Association
  • Chair: Kevin M. Murphy, University of Chicago

The Pennsylvania Adoption Exchange Improves Its Matching Process

Mustafa Akan
,
Carnegie Mellon University
Onur Kesten
,
Carnegie Mellon University
Vincent W. Slaugh
,
Carnegie Mellon University
Utku Unver
,
Boston College

Abstract

The Pennsylvania Adoption Exchange (PAE) helps case workers representing children in state custody by recommending prospective families for adoption. We describe PAE's operational challenges using case worker surveys and a regression analysis of data on child outcomes over multiple years. Using a discrete-event simulation of PAE, we justify the value of a statewide adoption network and demonstrate the importance of the family preference information quality on the percentage of children who successfully nd adoptive placements. Finally, we detail a series of simple improvements implemented by PAE to increase the adoptive placement rate through collecting more valuable information, improving the family ranking algorithm, and aligning incentives for families to provide useful preference information.

Existence of Stable Matchings in Large Markets With Complementarities

Eduardo M. Azevedo
,
University of Pennsylvania
John William Hatfield
,
University of Texas-Austin

Abstract

In two-sided matching markets with contracts, the existence of stable outcomes can be guaranteed only under certain restrictions on preferences; the typical restriction is that all agents' preferences are substitutable. We show that, in markets with a continuum of each type of agent, it is only necessary that agents on one side of the market have substitutable preferences to guarantee the existence of a stable outcome. We also consider more general settings with multilateral contracts and no structure on the set of agents, and show that the core is nonempty when there exists a continuum of agents of each type, regardless of agents' preferences. Finally, we show that in settings with bilateral contracts and transferable utility (but an arbitrary contractual network), the existence of competitive equilibria is guaranteed regardless of agents' preferences. We also consider large finite markets, showing that each of the three results above holds approximately in the analogous large finite market.

"Troll" Check? A Proposal for Administrative Review of Patent Litigation

Lauren Cohen
,
Harvard University
John M. Golden
,
University of Texas-Austin
Umit Gurun
,
University of Texas-Dallas
Scott Duke Kominers
,
Harvard University

Abstract

The patent system is commonly justified on grounds of promoting social welfare and, more specifically, scientific and technological progress. For years, however, there has been concern that patent litigation in the United States is undermining, rather than furthering, these goals. The time, cost, and complexity of patent suits provide openings for opportunistic assertions of patent infringement that can generate outcomes, possibly through settlement, that represent more a distortion than a fulfillment of patents’ purpose. Such opportunistic assertions can come from any form of patent holder but have been perceived as especially associated with patent-enforcement specialists commonly derided as "patent trolls."

This article proposes a means to address the information problems that facilitate opportunistic assertion—namely, the institution of an automatic process of substantive but non-binding administrative review of new patent-infringement lawsuits. Whether conducted by an independent Patent Litigation Review Board or a division of the U.S. Patent and Trademark Office, such review would (1) help discourage--or bring to an earlier and less costly end--relatively weak patent-infringement lawsuits; (2) strengthen the hands and likely fates of both patentees and accused infringers with especially robust cases; (3) flag weaknesses in litigation positions to the benefit of both private parties and the courts; and (4) provide policymakers with more readily aggregated information that facilitates evaluation of the patent system’s performance. Multiple economic models are used to indicate the likely benefits of such review. Nonetheless, consistent with the notion that an intended benefit of such review is improved information that can shape future policy, the article proposes that the review process be adopted only on a pilot basis, with the review’s status and shape to be reevaluated before the approval of any mandate for its continuance.
Discussant(s)
Allan Collard-Wexler
,
Duke University
Judd B. Kessler
,
University of Pennsylvania
Jeremy Fox
,
Rice University
Kevin M. Murphy
,
University of Chicago
JEL Classifications
  • C7 - Game Theory and Bargaining Theory
  • D4 - Market Structure, Pricing, and Design