‘Thinking Up Auctions Is Extremely Interesting’

Oleg Baranov with his PhD advisor, Professor Larry Ausubel, 2011

Photo courtesy of Oleg Baranov

Oleg Baranov is a graduate of Moscow State University, the New Economic School, and the University of Maryland. He also lectured and ran a popular course on market design at the University of Colorado. He recently passed review for a tenured position at HSE University, and served as the Head of the International Recruiting Committee at the Faculty of Economic Sciences in the 2022–2023 academic year. He will also begin teaching the course ‘Microeconomics 2’ on the HSE and NES Joint Programme in Economics in September 2023. In his interview, Oleg talks about auctions, studying for a PhD, and international recruiting.

— How did you start working with auctions?

— My work with auctions began when I was doing a specialist degree with a focus on Applied Mathematics and Computer Science at Moscow State University. In the NES master's programme, I digressed from auctions, but then, when applying for a PhD, I indicated that I had previously worked with auctions, so at the PhD at the University of Maryland I was assigned to professors specialising in auctions. There was a very strong group dedicated to auctions in Maryland at the time. It was interesting to work with them. There was a lot of learning and practice. The topic of auctions is extremely interesting.

Although I am developing research on other topics, I’m mainly involved in auctions and I publish articles only on the topic of auctions

— Could you tell us more about your research?

— I'll tell you about an article on two-stage auctions that I sent to a journal recently. The business case for this article was a spectrum auction in the telecommunications industry. Often, such auctions are divided into two stages. In the first stage, the goal is simply to determine the number of licenses that each player will get. In the second stage, the winners of the previous auction compete for specific frequencies, which are organised into spectrum bands (for example, 750–760 MHz, 760–770 MHz, etc).

Spectrum auctions are held in two stages to prevent participants from spoiling each other's winnings. Someone who receives several licenses (for example, three 10 MHz licenses) would like all of their frequencies to be located side by side in the spectrum. The two-stage auction process eliminates the occurrence of a ‘checker board’—when all frequencies are discontinuously distributed among different owners—because once the organiser of the auction knows who won and how many licenses they got, the second stage only includes lots for which each bidder will receive continuous frequencies.

In our article, we look at the second stage and show that the requirement for continuity in the winnings introduces new nuances. In this second stage, different auction formats can be used: a first-price auction, a second-price auction (Vickrey auction), etc.

Second-price auctions have serious pathologies—players can make serious bids, some win, some lose, and in the end, no one has to pay anything

The seller is dissatisfied, because they sold something valuable but received no money for it. Some participants are unhappy because they did not win anything, which means that someone has to pay for it, but no one has done so. The only ones who are satisfied are the participants who have won something of value but paid nothing.

We show that the constraint that the frequencies won must be located together creates even more pathologies for the Vickrey auction. We must be prepared in the future for such absurd results, since the two-step approach plus the constraint that winnings must be continuous create a very favourable environment for these pathologies. Not every industry has such constraints, but there are industries with a constraint on the continuity of winnings, and they are quite important (such as in the case of electricity auctions). That is why we wrote this article, proving that the pathologies of the Vickrey auction come up much more often if it is used in two-stage auctions with a constraint on the continuity of winnings.

— Have you only worked in academia?

— When I worked at the University of Colorado, I was advising bidders or governments that held auctions, helping them think through the design elements of their auctions. It's kind of academic work, but it’s also kind of simple consulting, because I had to write real rules for real auctions. Auctions can be planned for three or four years; it is discussed what will be sold and how.

— What courses did you teach at the University of Colorado?

— I had a standard set of courses there. I worked there for 11 years. I taught microeconomics for PhD students. It was a standard first year course, and this course was about the basic things that every student should know, even if he or she does not go into microeconomics later (as most don’t). Topics in this course included game theory, auctions, different concepts of equilibrium.

In addition, I taught undergraduate students. At first, I gave some standard courses, then some time in 2016 I created my own class: Market Design. This course became very popular. I was the only one who offered it. I taught this course all the time, because every semester this course was full. Now I have brought this class to HSE, and it's called Applied Market Design. I have already taught it at HSE once, and everything seems to have gone well. I am going to slightly change and adapt this course for HSE, and I hope that there will be demand for my course here too.

— You were the Head of the International Recruiting Committee at FES in the 2022–2023 academic year. Tell us about this job.

— It was my first year working in international recruiting. It's an interesting administrative job. This year it was easier for me to work, because there were much fewer applicants than usual. However, there were people on the list of candidates whom we would have interviewed and invited to HSE, even if the list of applicants had been much longer. We had three positions and we filled them all by hiring three people: a professor of finance and econometrics from Australia, a specialist in microtheory from Tehran, and a student who has just completed his PhD in India. The latter is engaged in field research related to women's rights with a focus on India.

The selection of foreign applicants for faculty positions at HSE is an interesting and rather demanding process

It’s necessary to talk to all the candidates and look at their articles. The faculty always needs to move forward, because life is dynamic, circumstances change, people come and go. We are certainly now in a situation where we would like to hire and hire. The fact that we hired three people is a good result, because we filled all the positions with high-class researchers, so we will not lose quality.

— Let's get back to preparing for work in academia. What do PhD programmes usually include?

— The first year is dedicated to compulsory courses. At this stage, students do not really choose anything. Everyone has to take courses in macroeconomics, microeconomics, econometrics, statistics. In summer, at the end of the first year, additional exams are often held in these disciplines. During the second year, there are either fewer required courses or even none at all, and students begin to take elective courses. For example, economic demography, health economics, etc. The list of elective courses offered by the university depends on the research interests of the professors. In the third year, it is probably still possible to take courses, but students already begin more active work on articles for their dissertation. In many places, it is necessary to write two or three articles which the professors believe have a chance of being published. These articles will constitute a dissertation.

— Should students write these articles individually or with coauthors?

— You can write them yourself, or you can write in collaboration with other students.

In general, in economics, the average number of authors per article is increasing

It is not as high as in physics or other sciences, but most economic articles have two or three coauthors. There are, of course, articles with larger numbers of authors or articles by one author, although there are fewer such publications. For a PhD student, there is probably value in writing an individual paper, because when a student applies for a job, an individual article which is in the process of publication is a good signal for the employer. In other respects, there is nothing wrong with collaboration. On the contrary, writing together is much more fun, so even a dissertation can have some chapters written in collaboration.

— What qualities are useful for a PhD student?

— The main thing, perhaps, is self-discipline. In many respects, a PhD means that you need to get up every morning and go to work, even though the deadline is in three years. It is hard to motivate yourself to work, because the deadline is far away, and it seems that in any case you’ll manage in time. But in fact, you need to work every day in order to manage in time. Self-discipline—the ability to sit down and work without a deadline—is an important thing.

As a lecturer, I always treated students in the following way: you can, of course, do nothing, but you are already studying here in graduate school. You came here not for me, but for yourself, and you learn all these things and train for your own benefit in order to come to the exam with knowledge.

I treated students as adults. Temper yourself, learn to control and push yourself

— Do you have any hobbies?

— My favourite activity that I discovered after moving back to Russia is winter sports. I couldn't do winter sports in Colorado, because Boulder, where I lived, is very high and has a warm climate, so it only snows for a few weeks. There are ski resorts in Colorado, and when I first moved to Boulder, I thought I would be skiing a lot. But then the children were born, and I didn’t have much time for skiing. In Russia, I rediscovered cross-country skiing in the forest. I did this as a child.

I also enjoy running. In general, running is not really my kind of sport, but if it’s running through the forest, then I like it. If it’s running on asphalt around buildings, then it's too boring.

I have another hobby which isn’t related to sports: cooking on a barbecue or grill. I love making complex dishes from different cuisines, from the classic pilaf to roasting meat in a tandoor.

---

Interview, text and translation by Olga Krylova, intern at the International Office of the Faculty of Economic Sciences, third-year student of the HSE and NES Joint Programme in Economics