The science of the Pittsburgh real estate market

One of the nice things about Pittsburgh is that a middle class family like ours can afford to buy a “mansion” very close to CMU and the University of Pittsburgh (where my wife is a Ph.D. student), but the real estate market here is quite peculiar; while some houses languish on the market for years, some fly off the market in a day, and honestly I can’t tell the difference.

Houses in the latter category are essentially sold via a first-price sealed-bid auction: Once it becomes apparent that multiple offers are going to be made, the buyers are told that they need to make their highest and best offer as there will be no negotiation phase; typically some of the offers are above the asking price and the house is sold to the highest bidder (who pays his bid).

I toyed with the idea of suggesting to our real estate broker to conduct a second-price auction instead, but my very informal analysis hit some snags:

1. This is actually an online (in the online algorithms sense) auction with dynamic supply and dynamic demand. If I don’t buy a specific house, I’ll probably buy a different one in the future. From the point of view of the seller, new buyers enter and leave the market. OK, we sort of know how to analyze these situations, but:
2. There are multiple, heterogeneous goods.
3. Buyers have unit demand, which should make things simpler, but interestingly their preferences are definitely not quasi-linear, in the following sense: When I say I’m willing to pay at most $x for a house h, what I mean is that I think I can get a better deal in the future. I don’t mean that my value for h is equal to $x, because I would much rather buy the house h at much more than $x than become homeless. And why would I become homeless? Because:
4. Buyers may have deadlines (sellers typically don’t). In our case, we have to move out of the house we’re renting by the end of July, and we’re becoming less picky (i.e., our willingness to pay for houses increases) as the deadline draws nearer. (The house is roughly three times the size we need? At least it’s only 80 years old!)

Admittedly, mechanism design with money hasn’t been my cup of tea so far (some people say that’s why I wrote this paper), so there may be relevant work I’m unaware of. But to me the (Pittsburgh) real estate market seems like a grand challenge for online mechanism design!

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Massive open online schools

We have recently managed to avoid blogging about massive open online courses (MOOCs), although at least two of our bloggers (Tim and Kevin) are avid MOOCers (see here and here). So, although I am by no means an expert on the topic, let me open the discussion with the hope that others will weigh in. I’ll start with a nice (but possibly bogus) anecdote:

Larry Ellison, genius loci of Oracle Corporation, was slumming recently. He was, the story goes, giving a talk at a big meeting of the American Association of University Professors, the guild organization that invigilates the protectionist rules that keep the professoriate in their tenured luxury.  Ellison began with a little flattery. Teachers, he said, are one of the most important assets of our society. Applause and appreciative murmurs.  Not only are teachers important, he said they are also drastically underpaid. Even more appreciative applause and scattered “Here, heres.” In fact, quoth this business giant, I think teachers are so important that they ought to be paid at least a $1 million a year. A standing ovation: who knew that someone from corporate America could be so  insightful?  Unfortunately, Ellison concluded, I’m only going to need about 100 of you.

A quick Google search did not corroborate this story, and the guy who wrote it, Roger Kimball, seems to have it in for professors in general, and the notion of tenure in particular. That said, I have observed at least a hint of schadenfreude is typical of news articles about MOOCs (perhaps because journalism itself was actually disrupted by the Internet).

My opinion is that MOOCs are a great tool for outreach, a way to get many people to know about the things you (professionally) care about — much like popular science books in an age when reading popular science books was cool. Personally I remain unconvinced that MOOCs have the potential to replace traditional college education.

Instead of rehashing the same arguments that many of us have seen, I’d like to raise a new point (although I wouldn’t be surprised if it has already been discussed somewhere). Many predict that the demise of higher education is imminent, but I haven’t seen anyone suggest that MOOCs will replace K-12 education. Granted, being able to read is a prerequisite for MOOCs, so elementary schools are probably not going to disappear any time soon. But as far as I can tell the main difference between high schools and colleges is that colleges are on average a lot more expensive. Unlike college education, which is very specialized, high school education really could be limited to 100 teachers (or even fewer): The best math teacher can in principle teach all of the high school math lessons, etc.

I imagine that this idea would seem repugnant to most people, but arguably the main reason is the way high school teachers are typically perceived — underpaid and hardworking despite adverse conditions, vs. the public’s perception of university professors — overpaid and living in “tenured luxury”. This perception is of course completely false; after all, some of us are living in untenured luxury.

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EC’13 registration is open

Mallesh Pai asked us to announce that the registration for EC’13 is open. Early registration ends May 29.

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