Market Failure and Market Design

Market unraveling occurs when competition leads to hiring or admissions happening earlier and earlier in advance of the actual start date. This loss of information causes offers to become short-lived and limits participants' ability to compare options, leading to a less efficient market.

The stable marriage algorithm, often using a deferred acceptance process, aims to create stable matches where no two participants would prefer each other over their assigned matches. It involves a step-by-step process of proposing and accepting/rejecting offers until a stable outcome is reached.

Medical residency programs can face 'unraveling' due to early hiring, leading to short offer windows and reduced mobility. A stable matching system, like the NRMP match, aims to solve this by creating a centralized process where applicants and programs rank preferences for a stable outcome.

The market for gastroenterologists unraveled because hiring moved too early, creating a thin market with dispersed offers and reduced mobility. They lost their stable match, leading to a less organized system until they rejoined a structured matching process.

Kidney exchange facilitates transplants between incompatible donor-patient pairs. If donor A cannot give to patient A but can give to patient B, and donor B cannot give to patient B but can give to patient A, an exchange can occur, creating two successful transplants where none might have otherwise.

Challenges include the need for simultaneous surgeries to ensure donor availability, the logistical complexity of multi-way exchanges (e.g., 4-way requires 8 ORs), and ensuring full disclosure of all potential pairs to maximize transplant outcomes.

The ABO blood group system dictates compatibility. Type O kidneys can go to any patient, but Type O patients can only receive Type O kidneys, making them the most vulnerable. Incompatibilities can also arise from pre-formed antibodies to specific tissue proteins.

Repugnance refers to transactions that some people find objectionable, even if they don't directly participate. These societal objections can lead to laws and informal constraints that prevent certain markets from existing or functioning fully, such as the market for human organs.

Societal views evolve; what was once repugnant can become acceptable, and vice versa. Examples include the historical difficulty in obtaining cadavers for medical study versus the current acceptance of exhibits like Body Worlds, and the shift from widespread indentured servitude to its condemnation.

Yes, sometimes the introduction of money can make a transaction seem repugnant. This is seen with interest on loans, payments to birth mothers for adoption (vs. selling a baby), prostitution (sex vs. market for sex), and selling organs (giving a kidney vs. selling one).

Repugnance acts as a significant constraint on market designers. It forces consideration of societal values and taboos, limiting the types of markets that can be created and influencing how they must be structured to gain acceptance and function ethically.