Market Design
Preprint
- 20 October 2021
- preprint
- Published by Elsevier BV in SSRN Electronic Journal
Abstract
This Handbook chapter seeks to introduce students and researchers of industrial organization (IO) to the field of market design. We emphasize two important points of connection between the IO and market design fields: a focus on market failures—both understanding sources of market failure and analyzing how to fix them—and an appreciation of institutional detail. Section II reviews theory, focusing on introducing the theory of matching and assignment mechanisms to a broad audience. It introduces a novel “taxonomy” of market design problems, covers the key mechanisms and their properties, and emphasizes several points of connection to traditional economic theory involving prices and competitive equilibrium. Section III reviews structural empirical methods that build on this theory. We describe how to estimate a workhorse random utility model under various data environments, ranging from data on reported preference data such as rank-order lists to data only on observed matches. These methods enable a quantification of trade-offs in designing markets and the effects of new market designs. Section IV discusses a wide variety of applications. We organize this discussion into three broad aims of market design research: (i) diagnosing market failures; (ii) evaluating and comparing various market designs; (iii) proposing new, improved designs. A point of emphasis is that theoretical and empirical analysis have been highly complementary in this research.This publication has 62 references indexed in Scilit:
- Analyzing the Determinants of the Matching of Public School Teachers to Jobs: Disentangling the Preferences of Teachers and EmployersJournal of Labor Economics, 2013
- Dynamic Pricing Behavior in Perishable Goods Markets: Evidence from Secondary Markets for Major League Baseball TicketsJournal of Political Economy, 2012
- Two-Sided Estimation of Mate Preferences for Similarities in Age, Education, and ReligionJournal of the American Statistical Association, 2008
- Unraveling yields inefficient matchings: evidence from post-season college football bowlsThe RAND Journal of Economics, 2007
- Matching and Price CompetitionThe American Economic Review, 2006
- Who Marries Whom and WhyJournal of Political Economy, 2006
- An exact likelihood analysis of the multinomial probit modelJournal of Econometrics, 1994
- Detection of Bid Rigging in Procurement AuctionsJournal of Political Economy, 1993
- On cores and indivisibilityJournal of Mathematical Economics, 1974
- The assignment game I: The coreInternational Journal of Game Theory, 1971