MS&E 336: Platform and Marketplace Design
Catalog course description
Detailed course description
- Problems. The first goal is to use the quarter to identify open research directions that have risen to the forefront with the rise of online platforms. We live in an exciting time for market design, with great interest in the fundamentals, as well as a rich set of applications that motivate research directions, and provide data and testbeds for validation. A key emphasis in this part of the class is to focus on “levers” that affect the information that market participants obtain about each other in a variety of ways.
- Tools. The second goal is to ensure students have access to a basic set of tools with which to reason about such markets. The course assumes students have already had prior exposure to game theory and economic modeling. In this course, we will focus on a set of tools that have specifically proven helpful in studying platform markets, and the effects of design interventions on these markets. A key emphasis is on large market models.
- Applications. Along the way, we hope to learn about how the research questions we identify and the tools we learn are relevant to specific marketplaces. This will be through a mix of mathematical modeling, empirical research, as well as anecdotal evidence.
- Participation in lecture [ 40% of course grade ]. You will be expected to read papers and actively participate in lectures. To help make sure this happens, for at least four of the weeks of the quarter, you will have to choose one paper that you need to read and prepare a “mini-review”. The mini-review consists of answers to the following three questions, in 100 words or less each:
- What is the paper about?
- What are the strengths of the paper?
- What are the weaknesses of the paper?
- Course project [ 60% of course grade ]. A course project is the main evaluation component of the class. The course project is meant to get you thinking actively about research problems in the market design problems represented by the course material. The project will culminate in a presentation to your fellow students, and a written report (due by March 20, 2015).
I will distribute more details on the project in the first week of lecture.
Part 1 (2 lectures): Introduction to platforms
- What is a (two-sided) platform?
- What is the objective of the platform operator,
what information does she possess, and
what tools does she have to acheive these objectives?
- What are the objectives of platform participants,
what information do they possess,
and what actions are available to them?
Part 2 (2 lectures): Operational details of platforms -- pricing
- Pricing usage
- Membership fees and subscriptions
- Usage-based fee with flat fee per transaction/match
- Usage-based fee with volume-based fee per transaction/match
- Pricing visibility: paying for preferential access to the other side of the market
- Pricing transaction risk: paying for reduced uncertainty of trade
Part 3 (3 lectures): Operational details of platforms -- reputation and feedback
- Examples of reputation and feedback systems
- What incentives do particular systems provide to market participants?
- How do we design systems that incentivize honest feedback?
- How should the platform use the feedback system as a “lever” to improve market performance?
- Horton and Golden, Reputation Inflation in an Online Market
Part 4 (3 lectures): Operational details of platforms -- search
- How do market participants cope with the search frictions of finding trading partners?
- What information should the platform share with market participants about potential matches?
- What mechanisms can the platform provide to participants to improve the signals they send each other?
- Horton and Johari, At What Quality and What Price? Inducing Separating Equilibria as a Market Design Problem
Part 5 (4 lectures): Modeling tools
- Large market models of static markets
- Directed search and decentralized matching
- Double auctions
- Large market models of dynamic markets
- Repeated (dynamic) auctions
- Dynamic matching models