The FINANCIAL — Has a friend ever tried to “match” you with a potential romantic partner? If yes, why did she decide to try to encourage the two of you to give it a try? Why did she not decide to hook you up with some other person? There were probably reasons that convinced her that you two would be a good match: maybe you were interested in the same sorts of things, had the same dreams, were of approximately the same level of attractiveness, or were both single.
This is the science of matching in its most rudimentary form: trying to match two participants in a market, when participants have trouble coming up with the right matching arrangements themselves.
However, matching doesn’t just happen in the dating market, but in many others as well. One such market is the one for donated organs. Take for example a woman who is need of a new kidney. Because she is unable to obtain a new organ from a donor, she needs to go through very expensive and burdensome kidney dialysis, and is at a risk of eventually dying. If she had access to a new donor organ, she would have the opportunity to live a healthy and prosperous life. Most donor kidneys come from people who die with their organs intact, but there are not enough donor kidneys available for everyone in need of one.
This is especially tough to swallow if you realize that we all have two kidneys, and most of us will function just fine with one kidney. However, donating a kidney, although it is relatively harmless, still requires you to undergo surgery under anesthesia. If I asked you to go to the hospital now and donate a kidney to a stranger, would you do so? Probably not. If someone gave you $100,000, would that make you reconsider your decision? A lot of people would probably take that offer.
These are some of the questions that Alvin Roth, a Harvard professor who won the 2012 Nobel Prize in Economics with Lloyd Shapley, studies and grapples with: how can we make markets more efficient? “
“[Our] aim is to know the workings and requirements of particular markets well enough to ﬁx them when they’re broken or to build markets from scratch when they’re missing,” he writes in a 2007 Harvard Business Review article.
More specifically, Prof. Roth is interested in the question of how to match market participants in non-traditional markets. In a regular market, in neoclassical economic theory, the person who is willing to pay more for a certain product, probably values it more, and overall utility is optimized by allocating the product to this person. However, what do you do in markets that are a bit more complicated than selling apples and tomatoes?
For example, if there are multiple schools and thousands of students who are looking to enter those schools, how do you efficiently match the students and the schools, based on both the preferences of the school and the student? How do you match doctors with hospitals? And how do you match kidney donors with recipients? Prof. Roth has come up with algorithms for each of these examples.
In the case of organ donation, the buying and selling of organs is usually not allowed. However, what if you have someone eager to give you their kidney for free, for example a family member, but your blood type doesn’t match? In a project that Prof. Roth has worked on, people who had eager non-matching donors were actually matched with people with the same problem. If the other person’s donor matches you, and your donor matches the other person, your problem is solved! In one such exchange, six donors and patients took part.
While Prof. Roth’s other work deserves just as much praise, I think it is worth spending some more time on this, because it is an extremely complex marketplace: money can play no role, matching donors and patients can be extremely hard, and the stakes are very high – the outcomes can literally mean the difference between life and death. Basically, you have something that someone else wants (a donor who can save their life) and someone else has something that you want (a donor who can save your life). Before, there were no markets to bring people together to facilitate these transactions: it is hard to go out there and find another donor and patient yourself. By creating the marketplace, and coming up with a system of matching pairs, patients have now been given a better chance of surviving and becoming healthy.
Usually, markets where buyers and sellers come together already exist and function fine. We do not need anyone to match buyers and sellers of tomatoes on the street. But in the case of non-traditional markets, especially those that don’t involve any money, innovative ways to match market participants can lead to outcomes that are better for society and all market participants who are involved. Give it a try with markets that you are involved in: for example, how can you make the process of allocating vacation days at your company more efficient? Study the work of Prof. Roth, and maybe you will be able to come up with a mechanism that will make all your colleagues happier.