Thursday, September 14, 2017

An Invitation to Market Design by Kominers, Teytelboym and Crawford

Scott, Alex and Vince have written an introduction to what I gather is a special issue of the Oxford Review of Economic Policy devoted to market design.  It is also a concise and easy to read introduction to the field, with some guesses about where we're going.

An Invitation to Market Design
Scott Duke Kominers, Alexander Teytelboym, Vincent P. Crawford
 September 4, 2017

Abstract: Market design seeks to translate economic theory and analysis into practical solutions to real-world problems. By redesigning both the rules that guide market transactions and the infrastructure that enables those transactions to take place, market designers can address a broad range of market failures. In this paper, we illustrate the process and power of market design through three examples: the design of medical residency matching programs; a scrip system to allocate food donations to food banks; and the recent “Incentive Auction” that reallocated wireless spectrum from television broadcasters to telecoms. Our lead examples show how effective market design can encourage participation, reduce gaming, and aggregate information, in order to improve liquidity, efficiency, and equity in markets. We also discuss a number of fruitful applications of market design in other areas of economic and public policy

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