Masters in Business• Mar 28, 2026• 1:14:05Interview

Maximizing Luck: Masters in Business with Judd Kessler | Masters in Business

From Masters in Business

Judd Kessler•Professor of Behavioral Economics and Market Design, Wharton

Executive Summary

Wharton Professor Judd Kessler discusses market design, the field of economics focused on allocating scarce resources in systems where price is not the only mechanism.
The conversation uses real-world examples like Taylor Swift concert tickets to illustrate how 'first-come, first-served' systems are exploited by bots and middlemen, and explores solutions like lotteries and identity-verified tickets.
The discussion extends to life-or-death markets, such as organ donation, analyzing how different incentive structures (like Israel's priority system for registered donors) can significantly increase the supply of kidneys.
Kessler argues that by understanding and redesigning the rules of these 'hidden markets,' society can create more efficient, equitable, and user-friendly outcomes for everything from housing to healthcare.

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Concerns Raised

Inefficiencies in 'first-come, first-served' systems are easily exploited by bots.
Poorly designed markets enable rent-seeking middlemen who extract value without creating it.
Suboptimal organ donation policies lead to a critical shortage and the discarding of viable kidneys.
Significant underbuilding of affordable housing creates massive, lottery-based allocation problems.

Opportunities Identified

Redesigning allocation systems to be more equitable and efficient using lotteries and preference-based matching.
Implementing non-monetary incentives to increase the supply of public goods like organ donations.
Using technology like identity verification to eliminate brokers in markets like live event ticketing.
Applying market design principles to improve outcomes in diverse areas like school choice, housing, and employment.

Key Themes

Market Design Beyond Prices

The core theme is that many systems for allocating scarce resources—from concert tickets and college admissions to kidneys—are 'hidden markets' that don't rely solely on price. The design of these markets' rules, whether lotteries, queues, or merit, has profound implications for efficiency and fairness.

This reframes many social and business challenges as design problems, suggesting that thoughtful adjustments to allocation rules can yield significantly better outcomes than simply letting prices dictate access.

The Inefficiency of 'First-Come, First-Served'

The discussion highlights how the 'first-come, first-served' model, common for online sales, is fundamentally broken in the digital age. It creates a race that favors automated bots over humans, allowing ticket brokers to capture value intended for artists and fans.

Businesses relying on this model for high-demand product drops or ticket sales risk alienating their customer base and losing revenue to rent-seeking middlemen, prompting a need for alternative systems like verified lotteries.

Incentives in Altruistic Markets

Using organ donation as a key example, the conversation explores how to increase the supply of a public good that relies on altruism. Non-monetary incentives, such as giving registered donors priority on transplant lists, can dramatically increase participation without commodifying the act itself.

This provides a powerful framework for policymakers and organizations looking to encourage prosocial behavior, demonstrating that well-designed, non-financial incentives can be more effective than purely voluntary or opt-out systems.

Combating Rent-Seeking and Middlemen

A recurring topic is how poorly designed markets create opportunities for speculators and brokers to extract value without creating it. The episode details how these actors exploit system flaws and discusses solutions like identity-linked tickets and controlled resale platforms to ensure value accrues to the creators and intended consumers.

This is critical for any industry with high-demand, limited-supply goods, as it outlines strategies to maintain brand equity, ensure fair access, and capture the full value of a product or experience.

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Topics

Market Design Behavioral Economics Game Theory Scarce Resource Allocation Ticketmaster Taylor Swift Live Events Ticket Resale Market Bots Organ Donation Kidney Transplants Incentive Structures Public Goods Housing Market Affordable Housing College Admissions FTC

Processed Apr 6, 2026 yt-dlp + mlx-whisper + Gemini