A large number of two-sided markets are now mediated by search and recommender systems, ranging from online retail and streaming entertainment to employment and romantic-partner matching. I will discuss in this talk how the design decisions that go into these search and recommender systems carry substantial power in shaping markets and allocating opportunity to the participants. This does not only raise legal and fairness questions, but also questions about how these systems shape incentives and the long-term effectiveness of the market.
At the core of these questions lies the problem of where to rank each item, and how this affects both sides of the market. While it is well understood how to maximize the utility to the users, this talk focuses on how rankings affect the items that are being ranked. From the items perspective, the ranking system is an arbiter of exposure and thus economic opportunity. I will discuss how machine learning algorithms that follow the conventional Probability Ranking Principle [1] can lead to undesirable and unfair exposure allocation for both exogenous and endogenous reasons. Exogenous reasons often manifest themselves as biases in the training data, which then get reflected in the learned ranking policy. But even when trained with unbiased data, reasons endogenous to the system can lead to unfair or undesirable allocation of opportunity. To overcome these challenges, I will present new machine learning algorithms [2,3,4] that directly address both endogenous and exogenous factors, allowing the designer to tailor the ranking policy to be appropriate for the specific two-sided market.
more »
« less
Managing Congestion in Matching Markets
Problem definition : Participants in matching markets face search and screening costs when seeking a match. We study how platform design can reduce the effort required to find a suitable partner. Practical/academic relevance : The success of matching platforms requires designs that minimize search effort and facilitate efficient market clearing. Methodology : We study a game-theoretic model in which “applicants” and “employers” pay costs to search and screen. An important feature of our model is that both sides may waste effort: Some applications are never screened, and employers screen applicants who may have already matched. We prove existence and uniqueness of equilibrium and characterize welfare for participants on both sides of the market. Results : We identify that the market operates in one of two regimes: It is either screening-limited or application-limited. In screening-limited markets, employer welfare is low, and some employers choose not to participate. This occurs when application costs are low and there are enough employers that most applicants match, implying that many screened applicants are unavailable. In application-limited markets, applicants face a “tragedy of the commons” and send many applications that are never read. The resulting inefficiency is worst when there is a shortage of employers. We show that simple interventions—such as limiting the number of applications that an individual can send, making it more costly to apply, or setting an appropriate market-wide wage—can significantly improve the welfare of agents on one or both sides of the market. Managerial implications : Our results suggest that platforms cannot focus exclusively on attracting participants and making it easy to contact potential match partners. A good user experience requires that participants not waste effort considering possibilities that are unlikely to be available. The operational interventions we study alleviate congestion by ensuring that potential match partners are likely to be available.
more »
« less
- Award ID(s):
- 1653477
- NSF-PAR ID:
- 10309697
- Date Published:
- Journal Name:
- Manufacturing & Service Operations Management
- Volume:
- 23
- Issue:
- 3
- ISSN:
- 1523-4614
- Format(s):
- Medium: X
- Sponsoring Org:
- National Science Foundation
More Like this
-
-
Organizations that would mutually benefit from pooling their data are otherwise wary of sharing. This is because sharing data is costly—in time and effort—and, at the same time, the benefits of sharing are not clear. Without a clear cost-benefit analysis, participants default in not sharing. As a consequence, many opportunities to create valuable data-sharing consortia never materialize and the value of data remains locked. We introduce a new sharing model, market protocol, and algorithms to incentivize the creation of data-sharing markets. The combined contributions of this paper, which we call DSC, incentivize the creation of data-sharing markets that unleash the value of data for its participants. The sharing model introduces two incentives; one that guarantees that participating is better than not doing so, and another that compensates participants according to how valuable is their data. Because operating the consortia is costly, we are also concerned with ensuring its operation is sustainable: we design a protocol that ensures that valuable data-sharing consortia form when it is sustainable. We introduce algorithms to elicit the value of data from the participants, which is used to: first, cover the costs of operating the consortia, and second compensate data contributions. For the latter, we challenge the use of the Shapley value to allocate revenue. We offer analytical and empirical evidence for this and introduce an alternative method that compensates participants better and leads to the formation of more data-sharing consortia.more » « less
-
We develop, estimate, and test a tractable general equilibrium model of oligopsony with differentiated jobs and concentrated labor markets. We estimate key model parameters by matching new evidence on the relationship between firms’ local labor market share and their employment and wage responses to state corporate tax changes. The model quantitatively replicates quasi-experimental evidence on imperfect productivity-wage pass-through and strategic wage setting of dominant employers. Relative to the efficient allocation, welfare losses from labor market power are 7.6 percent, while output is 20.9 percent lower. Lastly, declining local concentration added 4 percentage points to labor’s share of income between 1977 and 2013. (JEL E25, H71, J24, J31, J42, R23)more » « less
-
This paper describes a process that integrates behavioral and decision science methods to design and evaluate interventions to disrupt illicit behaviors. We developed this process by extending a framework used to study systems with uncertain outcomes, where only partial information is observable, and wherein there are multiple participating parties with competing goals. The extended framework that we propose builds from artefactual data collection, thematic analysis, and descriptive analysis, toward predictive modeling and agent-based modeling. We use agent-based modeling to characterize and predict interactions between system participants for the purpose of improving our understanding of interventional targets in a virtual environment before piloting them in the field. We apply our extended framework to an exploratory case study that examines the potential of worker centers as a venue for deploying interventions to address labor exploitation and human trafficking. This case study focuses on reducing wage theft, the most prevalent form of exploitation experienced by day laborers and applies the first three steps of the extended framework. Specifically, the case study makes a preliminary assessment of two types of social interventions designed to disrupt exploitative processes and improve the experiences of day laborers, namely: (1) advocates training day laborers about their workers’ rights and options that they have for addressing wage theft and (2) media campaigns designed to disseminate similar educational messages about workers’ rights and options to address wage theft through broadcast channels. Applying the extended framework to this case study of day laborers at a worker center demonstrates how digital technology could be used to monitor, evaluate, and support collaborations between worker center staff and day laborers. Ideally, these collaborations could be improved to mitigate the risks and costs of wage theft, build trust between worker center stakeholders, and address communication challenges between day laborers and employers, in the context of temporary work. Based on the application of the extended framework to this case study of worker center day laborers, we discuss how next steps in the research framework should prioritize understanding how and why employers make decisions to participate in wage theft and the potential for restorative justice and equity matching as a relationship model for employers and laborers in a well-being economy.more » « less
-
more » « less
Abstract We explore efficiency and optimal policy in decentralized transport markets, such as taxis, trucks, and bulk shipping. We show that in these markets, search frictions distort the transportation network and the dynamic allocation of carriers over space. We derive explicit and intuitive conditions for efficiency and show how they translate into efficient pricing rules, or optimal taxes and subsidies for the planner who cannot set prices directly. The results imply that destination-based pricing is essential to attain efficiency. Then, using data from dry bulk shipping, we demonstrate that search frictions lead to a sizable social loss and substantial misallocation of ships over space. Optimal policy can eliminate about half of the welfare loss. Can a centralizing platform, often arising as a market-based solution to search frictions, do better? Interestingly, the answer is no; although the platform eradicates frictions, it exerts market power, thus eroding the welfare gains. Finally, we use two recent interventions in the industry (China’s Belt and Road Initiative and the environmental initiative IMO 2020) to demonstrate that taking into account the efficiency properties of transport markets is germane to any proposed policy.
- Free Publicly Accessible Full Text
-
Accepted Manuscript1.0
- Journal Article:
- https://doi.org/10.1287/msom.2020.0927
