Earlier last week, the Nobel Prize for economics was awarded to Alvin Roth, George Gund Professor of Economics and Business Administration at Harvard Business School, and Lloyd Shapley, professor emeritus at University of California. At the core of their work, which dates back as far as 1962, was finding a solution to the problem of “who gets what” by developing a method for “stable matching”. The solution? A set of mathematical algorithms developed by Shapley and then applied to a number of real world problems by Roth.
The earliest study involved Shapley’s work with the late David Gale in 1962 called “College Admissions and the Stability of Marriage.” In the paper, the pair explained how individuals (or kids and colleges) could be paired together in “stable” matches that would last. This initially got the attention of the Nobel committee as well as another paper dating all the way back to 1953 in which Shapley suggested that it might be possible to evaluate, in a numerical way, decisions in games and other interactions between people.
Add to this Alvin Roth’s remarkable application of matching theory as applied to both the college admissions process as well as the kidney transplant process. In this latter example, Roth was instrumental in establishing an efficient kidney exchange market where donors and recipients were matched more quickly and effectively than any previous system.
At the heart of their work, is the notion of stable matching or more simply – everyone meets their match whether it is a spouse, college admission or a kidney donor. The Sveriges Riksbank Prize in Economic Sciences committee was most impressed by Shapley and Roth’s ability to put “concrete economics put to practical use.”
Of course I was struck by the similarities between their matching theory and improving the customer experience in online shopping. Isn’t that all about matching theory? While shopping may not have the same gravitas as finding a kidney donor or a spouse, they share a common principle: matching the needs of one individual with the services offered by another. So if those of us in ecommerce get frustrated by our inability to get it right all the time, not to worry. Some of the best mathematical minds have been working away at this very issue for over 50 years.