Your inbox is brimming with new emails, and you need to decide which to reply to quickly and which to ignore. You try to schedule something for next week, but your calendar is already packed with recurring meetings. So many employees have asked for a particular day off—or requested a particular shift schedule—that you can’t grant all their requests. You post a job listing for a single position and get 250 applications.
These situations arise constantly in our work lives, and their analogues come up in our personal lives. But despite their frequency, we often struggle with how to handle them. We barrel through our inbox and move things around on our calendar. We follow (perhaps unwritten) rules to determine which employees get requests filled and which do not. Sometimes we decide it’s too much to figure out ourselves and outsource the whole endeavor to AI.
The common theme of the examples above is what economists call excess demand, which arises when more people want something than we can serve.
Economists have a go-to solution for excess demand: rising prices. When prices go up, fewer people find that it is worthwhile, or even feasible, to pay for the thing, so they stop asking for it. But there are times when price doesn’t exist—for example, it would be inappropriate to charge people for a job interview.
In these scenarios, we don’t use prices, but we still decide who gets what. We respond to emails and take meetings. We decide who gets the day off and who gets the best shift schedule. We interview candidates and eventually hire someone.
Instead of prices changing, a “hidden market” arises to resolve the excess demand. These hidden markets are under our control. We set the rules to decide who gets what, and we can optimize them.
To do so, we must think carefully about what we want our hidden markets to achieve: a set of goals that I call the three E’s: efficiency, equity, and ease.
Effective hidden markets are efficient, meaning that they do not waste resources and they give resources to the people who value them most. You want to use your precious inbox time to respond to the emails that will generate the most value for recipients. You want to give the day off to an employee who really values it (say prioritizing a once-in-a-lifetime event, like a child’s graduation, over something that could happen another day, like a beach trip with friends). You want the job to go to the candidate who is the best fit for the firm.
Effective hidden markets are equitable, meaning that they treat people fairly. It would be unfair if one employee always got their preferred schedule while an equally deserving employee was always given something less desirable.
Effective hidden markets are also easy to participate in. A hidden market would not be easy if getting what you want required an ordeal, like sending a dozen follow-up emails to get a reply or doing personal favors for a manager to get a preferred day off.
This three-E framework can help you improve—and even optimize—the hidden markets you control.
When I open my inbox, I think a lot about whether I am using my time efficiently. Doing so requires triaging anything that isn’t important. Among my important emails, I first look to see if anything requires my immediate attention. When in doubt, I use a last-in, first-out rule for triage, meaning I prioritize emails that came in later to ones that came in earlier. I do this because people who emailed me most recently might still be working on whatever project they had just pinged me about. If so, a snappy reply might be more valuable to them than to someone who emailed me last night.
When I look at my calendar, I ask whether I am being equitable in how I allocate my time. This has caused me to question my recurring meetings, which repeat on the same day and time (e.g., each Thursday at 10 a.m.). Recurring meetings impose a first-in-time, first-in-right rule that gives perpetual access to a scarce resource based on the order in which it was originally claimed. A recurring meeting set up a year ago gets priority (for Thursday at 10 a.m.) over anything that comes later. But a new project might be just as worthy—or even more worthy—of my time than the projects whose meetings are clogging my calendar. It is unfair (and possibly also inefficient) to give it the dregs.
Rules for staff scheduling might be based on seniority or worker tenure. In workplaces with regular turnover—where a person who sticks around long enough will eventually go from getting to pick last to getting to pick first—such rules might be fair. But if the same set of workers get their first choices for decades while workers who started a few years later are consistently out of luck, this is no longer equitable.
To combat this, many workplaces use first-come, first-served rules to let workers claim vacation days or preferred shifts. While first-come, first-served is familiar and ubiquitous, it is not necessarily easy for market participants. Employees might have to make requests before they know what schedule would be ideal and, if there is a race to sign up, employees must be vigilant about asking immediately once requests start being accepted.
But a thoughtful market designer can make these systems easier and more equitable by building in memory, so workers who did not get their first choice this year get priority next year and perhaps by building in a fair lottery (rather than choosing based on whose email request arrived a few seconds earlier).
In these situations—and in many others—we are market designers who must resolve excess demand by allocating scarce resources to the many people who want them. Considering the three-Es can help us generate allocations that are efficient, equitable, and easy for market participants.
If we do it right, we can achieve a fourth E: elevating us as market designers, so we are as happy as possible with the outcomes.