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Parag Pathak - the matchmaker

News: Nov 28, 2019

Photo: Jeffrey Johns

One of the rising stars in matching theory is Parag Pathak, Professor of Microeconomics at the Massachusetts Institute of Technology (MIT). In October 2019, he visited the School of Business, Economics and Law to attend the “Matching in Practice” workshop, where he was the keynote speaker.

At the age of 39 Parag Pathak is a highly merited scholar with degrees in applied mathematics and business economics, and in 2018 received the John Bates Clark Medal as the best American economist under age 40 from the American Economic Association. In 2019 the Economist magazine listed him as one of the 8 best young economists of the decade.

An economic theory deployed to the real world

Matching theory is one of two areas (the other being auction theory) within market design, a relatively new field of economics. Matching theory relies heavily on elements from mathematic disciplines like optimization and game theory. The algorithms in matching theory are often applied to problems where there is no price. The goal is to match supply and demand in an optimized way such that there is no further change to the final assignments that would benefit anyone.

“It’s an economic theory deployed to the real world. Since there is no price we have to be careful about how we equilibrate demand and supply,” says Parag Pathak, continuing:
“The question we ask is if there are better and more efficient systems to allocate resources – in other words, how can we give people what they want in the fairest way possible?”

School assignment and kidney transplants

There are three major problems for which matching is in use so far, according to Parag Pathak. The first is school assignment, where the goal is to match each student with one school. In cities where families are allowed to choose schools, students often have preferences. On the other hand, schools have limited capacities and also often priorities – for example, obligations to give seats to students living nearby, or serving students who already have an older sibling in the school. How do you best match student desires with school priorities?

Parag Pathak has worked on this problem for public schools in many large American cities, where existing assignment methods left much to be desired. For example, the traditional method used in Boston (“first preference first”) assigned many students to schools they didn’t really want to attend, while unfairly favoring those families that realized that there were strategies they could use to get better assignments.

“We helped them design a new system. Today no one can benefit from being strategic. The matching method also provides levers to tweak the application process, if you for example need to adjust income stratification or segregation in schools. This is what we hope school districts will do – once the platform is set, they can focus on improving schools,” says Parag Pathak.

The second problem concerns kidney transplants. A large number of patients with kidney failure can be helped by someone donating one of their own healthy ones. How to maximize the number of matching donors and recipients?

“Kidneys are usually donated by close relatives or partners. But not all kidneys work in all recipients, there are incompatibility issues and risks of organ rejection to contend with. That makes it hard to find someone willing to donate a kidney that is also a biological match. It’s illegal to buy and sell organs, so price is not a tool we can use. But matching can increase the number of transplanted organs, for example by working with paired swaps. That’s one way to implement matching in the real world,” says Parag Pathak.

The third problem Parag Pathak mentions is assignment of public housing. Existing systems often suffer from long queues, elderly IT solutions and low efficiency.
“I think the future of market design is very bright, not least because of the increasing computing power. We can solve ever more complicated problems,” says Parag Pathak.

Read more about Parag Pathak and matching



Page Manager: Maria Norrström|Last update: 4/26/2019

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