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What Have We Learned from Market Design?

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  • Alvin E. Roth

    (Alvin E. Roth is George Gund Professor of Economics and Business Administration in the Department of Economics at Harvard University and the Harvard Business School.)

Abstract

This essay discusses some things we have learned about markets, in the process of designing marketplaces to fix market failures. To work well, marketplaces have to provide thickness, i.e. they need to attract a large enough proportion of the potential participants in the market; they have to overcome the congestion that thickness can bring, by making it possible to consider enough alternative transactions to arrive at good ones; and they need to make it safe and sufficiently simple to participate in the market, as opposed to transacting outside of the market, or having to engage in costly and risky strategic behavior. I'll draw on recent examples of market design ranging from labor markets for doctors and new economists, to kidney exchange, and school choice in New York City and Boston.

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Bibliographic Info

Article provided by MIT Press in its journal Innovations: Technology, Governance, Globalization.

Volume (Year): 3 (2008)
Issue (Month): 1 (January)
Pages: 119-147

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Handle: RePEc:tpr:inntgg:v:3:y:2008:i:1:p:119-147

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References

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  1. Dan Ariely & Axel Ockenfels & Alvin E. Roth, 2005. "An Experimental Analysis of Ending Rules in Internet Auctions," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 890-907, Winter.
  2. Alvin E Roth, 2007. "Deferred Acceptance Algorithms: History, Theory, Practice, and Open Questions," Levine's Bibliography 843644000000000283, UCLA Department of Economics.
  3. Tayfun Sönmez & Alvin E. Roth & M. Utku Ünver, 2007. "Efficient Kidney Exchange: Coincidence of Wants in Markets with Compatibility-Based Preferences," American Economic Review, American Economic Association, vol. 97(3), pages 828-851, June.
  4. Georgy Artemov, 2008. "Matching and price competition: would personalized prices help?," International Journal of Game Theory, Springer, vol. 36(3), pages 321-331, March.
  5. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford.
  6. Sonmez, Tayfun, 1997. "Manipulation via Capacities in Two-Sided Matching Markets," Journal of Economic Theory, Elsevier, vol. 77(1), pages 197-204, November.
  7. Alvin E. Roth & Tayfun Sönmez & M. Utku Ünver, 2004. "Kidney Exchange," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 457-488, May.
  8. Atila Abdulkadiroğlu & Parag A. Pathak & Alvin E. Roth & Tayfun S�nmez, 2005. "The Boston Public School Match," American Economic Review, American Economic Association, vol. 95(2), pages 368-371, May.
  9. Atila Abdulkadiroglu & Parag A. Pathak & Alvin E. Roth, 2009. "Strategy-Proofness versus Efficiency in Matching with Indifferences: Redesigning the NYC High School Match," American Economic Review, American Economic Association, vol. 99(5), pages 1954-78, December.
  10. Alvin E. Roth & Tayfun Sonmez & M. Utku Unver, 2004. "Pairwise Kidney Exchange," Levine's Bibliography 122247000000000350, UCLA Department of Economics.
  11. Muriel Niederle, 2007. "Competitive Wages in a Match with Ordered Contracts," American Economic Review, American Economic Association, vol. 97(5), pages 1957-1969, December.
  12. C. Nicholas McKinney & Muriel Niederle & Alvin E. Roth, 2005. "The Collapse of a Medical Labor Clearinghouse (and Why Such Failures Are Rare)," American Economic Review, American Economic Association, vol. 95(3), pages 878-889, June.
  13. Shapley, Lloyd & Scarf, Herbert, 1974. "On cores and indivisibility," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 23-37, March.
  14. Alvin E. Roth, 2002. "The Economist as Engineer: Game Theory, Experimentation, and Computation as Tools for Design Economics," Econometrica, Econometric Society, vol. 70(4), pages 1341-1378, July.
  15. Jeremy Bulow & Jonathan Levin, 2006. "Matching and Price Competition," American Economic Review, American Economic Association, vol. 96(3), pages 652-668, June.
  16. Gary S. Becker & Julio Jorge El�as, 2007. "Introducing Incentives in the Market for Live and Cadaveric Organ Donations," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 3-24, Summer.
  17. Roth, Alvin E, 1984. "The Evolution of the Labor Market for Medical Interns and Residents: A Case Study in Game Theory," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 991-1016, December.
  18. Muriel Niederle & Alvin E. Roth, 2003. "Unraveling Reduces Mobility in a Labor Market: Gastroenterology with and without a Centralized Match," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1342-1352, December.
  19. Alvin E. Roth, 2007. "Repugnance as a Constraint on Markets," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 37-58, Summer.
  20. Peter Cramton & Yoav Shoham & Richard Steinberg, 2004. "Combinatorial Auctions," Papers of Peter Cramton 04mit, University of Maryland, Department of Economics - Peter Cramton, revised 2004.
  21. Muriel Niederle & Alvin E. Roth, 2009. "The Effects of a Centralized Clearinghouse on Job Placement, Wages, and Hiring Practices," NBER Chapters, in: Studies of Labor Market Intermediation, pages 235-271 National Bureau of Economic Research, Inc.
  22. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
  23. Atila Abdulkadiroglu & Yeon-Koo Che & Yosuke Yasuda, 2010. "Expanding 'Choice' in School Choice," Working Papers 10-23, Duke University, Department of Economics.
  24. Paul Milgrom, 2000. "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 245-272, April.
  25. Roth, Alvin & Ünver, M. Utku & Sönmez, Tayfun, 2005. "A Kidney Exchange Clearinghouse in New England," Scholarly Articles 2562810, Harvard University Department of Economics.
  26. Muriel Niederle & Alvin E. Roth, 2005. "The Gastroenterology Fellowship Market: Should There Be a Match?," American Economic Review, American Economic Association, vol. 95(2), pages 372-375, May.
  27. Alvin E. Roth & Axel Ockenfels, . "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," Papers on Strategic Interaction 2002-32, Max Planck Institute of Economics, Strategic Interaction Group.
  28. Roth, Alvin E, 1991. "A Natural Experiment in the Organization of Entry-Level Labor Markets: Regional Markets for New Physicians and Surgeons in the United Kingdom," American Economic Review, American Economic Association, vol. 81(3), pages 415-40, June.
  29. Alvin E. Roth & Elliott Peranson, 1999. "The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design," NBER Working Papers 6963, National Bureau of Economic Research, Inc.
  30. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
  31. Roth, Alvin E & Xing, Xiaolin, 1994. "Jumping the Gun: Imperfections and Institutions Related to the Timing of Market Transactions," American Economic Review, American Economic Association, vol. 84(4), pages 992-1044, September.
  32. Guillaume R. Fréchette & Alvin E. Roth & M. Utku Ünver, 2007. "Unraveling yields inefficient matchings: evidence from post-season college football bowls," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 967-982, December.
  33. Posner, Richard A. & Avery, Christopher & Jolls, Christine & Roth, Alvin, 2001. "The Market for Federal Judicial Law Clerks," Scholarly Articles 2623748, Harvard University Department of Economics.
  34. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721.
  35. Kamecke, Ulrich, 1998. "Wage Formation in a Centralized Matching Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 33-53, February.
  36. Atila Abdulkadiroglu & Parag A. Pathak & Alvin E. Roth & Tayfun Sönmez, 2006. "Changing the Boston School Choice Mechanism," Levine's Bibliography 122247000000001022, UCLA Department of Economics.
  37. Li, Hao & Rosen, Sherwin, 1998. "Unraveling in Matching Markets," American Economic Review, American Economic Association, vol. 88(3), pages 371-87, June.
  38. Atila Abdulkadiroglu & Tayfun Smez, 2003. "School Choice: A Mechanism Design Approach," Discussion Papers 0203-18, Columbia University, Department of Economics.
  39. Atila Abdulkadiroğlu & Parag A. Pathak & Alvin E. Roth, 2005. "The New York City High School Match," American Economic Review, American Economic Association, vol. 95(2), pages 364-367, May.
  40. Roth, Alvin E., 1985. "The college admissions problem is not equivalent to the marriage problem," Journal of Economic Theory, Elsevier, vol. 36(2), pages 277-288, August.
  41. Roth, Alvin E & Xing, Xiaolin, 1997. "Turnaround Time and Bottlenecks in Market Clearing: Decentralized Matching in the Market for Clinical Psychologists," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 284-329, April.
  42. Roth, Alvin E, 1991. "Game Theory as a Part of Empirical Economics," Economic Journal, Royal Economic Society, vol. 101(404), pages 107-14, January.
  43. Bruno Biais & Pierre Hillion & Chester Spatt, 1999. "Price Discovery and Learning during the Preopening Period in the Paris Bourse," Journal of Political Economy, University of Chicago Press, vol. 107(6), pages 1218-1248, December.
  44. Alvin E Roth & Richard A Posner & Christine Jolls & Christopher Avery, 2007. "The New Market for Federal Judicial Law Clerks," Levine's Bibliography 843644000000000288, UCLA Department of Economics.
  45. Fuhito Kojima & Parag A. Pathak, 2009. "Incentives and Stability in Large Two-Sided Matching Markets," American Economic Review, American Economic Association, vol. 99(3), pages 608-27, June.
  46. Charles R. Plott, 1997. "Laboratory Experimental Testbeds: Application to the PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 605-638, 09.
  47. Roth, Alvin E. & Sotomayor, Marilda, 1992. "Two-sided matching," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 16, pages 485-541 Elsevier.
  48. Alvin E Roth & Muriel Niederle, 2007. "Making Markets Thick: Designing Rules for Offers and Acceptances," Levine's Bibliography 843644000000000142, UCLA Department of Economics.
  49. Ergin, Haluk & Sonmez, Tayfun, 2006. "Games of school choice under the Boston mechanism," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 215-237, January.
  50. Robert Wilson, 2002. "Architecture of Power Markets," Econometrica, Econometric Society, vol. 70(4), pages 1299-1340, July.
  51. Peter Cramton, 1997. "The FCC Spectrum Auctions: An Early Assessment," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 431-495, 09.
  52. David S. Evans & Andrei Hagiu & Richard Schmalensee, 2008. "Invisible Engines: How Software Platforms Drive Innovation and Transform Industries," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550687, December.
  53. Abdulkadiroglu, Atila & Sonmez, Tayfun, 1999. "House Allocation with Existing Tenants," Journal of Economic Theory, Elsevier, vol. 88(2), pages 233-260, October.
  54. John Cawley, 2001. "A Guide (and Advice) for Economists on the U. S. Junior Academic Job Market," Labor and Demography 0109001, EconWPA, revised 27 Sep 2001.
  55. Roth, Alvin E., 1982. "Incentive compatibility in a market with indivisible goods," Economics Letters, Elsevier, vol. 9(2), pages 127-132.
  56. John H. Kagel & Alvin E. Roth, 2000. "The Dynamics Of Reorganization In Matching Markets: A Laboratory Experiment Motivated By A Natural Experiment," The Quarterly Journal of Economics, MIT Press, vol. 115(1), pages 201-235, February.
  57. Crawford, Vincent P., 2005. "The Flexible-Salary Match: A Proposal to Increase the Salary Flexibility of the National Resident Matching Program," University of California at San Diego, Economics Working Paper Series qt2gw114b2, Department of Economics, UC San Diego.
  58. Parag A. Pathak & Tayfun Sonmez, 2008. "Leveling the Playing Field: Sincere and Sophisticated Players in the Boston Mechanism," American Economic Review, American Economic Association, vol. 98(4), pages 1636-52, September.
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  1. Al Roth
    by Liam Delaney in Geary Behaviour Centre on 2010-07-26 11:06:00
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