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What Have We Learned from Market Design?

In: Innovation Policy and the Economy, Volume 9

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  • Alvin E. Roth

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, that is, 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 will 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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This chapter was published in:

  • Josh Lerner & Scott Stern, 2009. "Innovation Policy and the Economy, Volume 9," NBER Books, National Bureau of Economic Research, Inc, number lern08-1.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 8185.

    Handle: RePEc:nbr:nberch:8185

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Peter Cramton, 1997. "The FCC Spectrum Auctions: An Early Assessment," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 6(3), pages 431-495, 09.
    2. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Series Working Papers 2004-W09, University of Oxford, Department of Economics.
    3. Georgy Artemov, 2008. "Matching and price competition: would personalized prices help?," International Journal of Game Theory, Springer, Springer, vol. 36(3), pages 321-331, March.
    4. Bulow, Jeremy I. & Levin, Jonathan, 2003. "Matching and Price Competition," Research Papers, Stanford University, Graduate School of Business 1818, Stanford University, Graduate School of Business.
    5. 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.
    6. Sonmez, Tayfun, 1997. "Manipulation via Capacities in Two-Sided Matching Markets," Journal of Economic Theory, Elsevier, Elsevier, vol. 77(1), pages 197-204, November.
    7. 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, Department of Economics, UC San Diego qt2gw114b2, Department of Economics, UC San Diego.
    8. 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.
    9. Guillaume Frechette & Alvin E. Roth & M. Utku Ünver, 2004. "Unraveling Yields Inefficient Matchings: Evidence from Post- Season College Football Bowls," Microeconomics, EconWPA 0404001, EconWPA, revised 24 Sep 2004.
    10. Roth, Alvin & Ünver, M. Utku & Sönmez, Tayfun, 2005. "A Kidney Exchange Clearinghouse in New England," Scholarly Articles 2562810, Harvard University Department of Economics.
    11. 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, American Economic Association, vol. 99(5), pages 1954-78, December.
    12. Alvin E. Roth & Tayfun Sönmez & M. Utku Ünver, 2004. "Pairwise Kidney Exchange," Boston College Working Papers in Economics, Boston College Department of Economics 620, Boston College Department of Economics.
    13. Atila Abdulkadiroğlu & Parag A. Pathak & Alvin E. Roth, 2005. "The New York City High School Match," American Economic Review, American Economic Association, American Economic Association, vol. 95(2), pages 364-367, May.
    14. 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, American Economic Association, vol. 84(4), pages 992-1044, September.
    15. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521551847.
    16. 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, University of Chicago Press, vol. 92(6), pages 991-1016, December.
    17. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
    18. Atila Abdulkadiroglu & Parag A. Pathak & Alvin E. Roth & Tayfun Sönmez, 2006. "Changing the Boston School Choice Mechanism," Boston College Working Papers in Economics, Boston College Department of Economics 639, Boston College Department of Economics.
    19. Shapley, Lloyd & Scarf, Herbert, 1974. "On cores and indivisibility," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 23-37, March.
    20. Roth, Alvin E, 1991. "Game Theory as a Part of Empirical Economics," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 101(404), pages 107-14, January.
    21. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262061414, December.
    22. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, American Economic Association, vol. 92(4), pages 1093-1103, September.
    23. Roth, Alvin & Ünver, M. Utku & Sönmez, Tayfun, 2004. "Kidney Exchange," Scholarly Articles 2580565, Harvard University Department of Economics.
    24. Roth, Alvin E., 1985. "The college admissions problem is not equivalent to the marriage problem," Journal of Economic Theory, Elsevier, Elsevier, vol. 36(2), pages 277-288, August.
    25. McKinney, C. Nicholas & Niederle, Muriel & Roth, Alvin, 2005. "The collapse of a medical labor clearinghouse (and why such failures are rare)," Scholarly Articles 2570404, Harvard University Department of Economics.
    26. Atila Abdulkadiroglu & Tayfun Smez, 2003. "School Choice: A Mechanism Design Approach," Discussion Papers, Columbia University, Department of Economics 0203-18, Columbia University, Department of Economics.
    27. Li, Hao & Rosen, Sherwin, 1998. "Unraveling in Matching Markets," American Economic Review, American Economic Association, American Economic Association, vol. 88(3), pages 371-87, June.
    28. 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, University of Chicago Press, vol. 107(6), pages 1218-1248, December.
    29. Parag A. Pathak & Tayfun Sonmez, 2008. "Leveling the Playing Field: Sincere and Sophisticated Players in the Boston Mechanism," American Economic Review, American Economic Association, American Economic Association, vol. 98(4), pages 1636-52, September.
    30. Ünver, M. Utku & Sönmez, Tayfun & Roth, Alvin, 2007. "Efficient Kidney Exchange: Coincidence of Wants in a Markets with Compatibility-Based Preferences," Scholarly Articles 2562809, Harvard University Department of Economics.
    31. David S. Evans & Andrei Hagiu & Richard Schmalensee, 2006. "Invisible Engines: How Software Platforms Drive Innovation and Transform Industries," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262050854, December.
    32. Haluk Ergin & Tayfun Sönmez, 2005. "Games of School Choice under the Boston Mechanism," Boston College Working Papers in Economics, Boston College Department of Economics 619, Boston College Department of Economics.
    33. Dan Ariely & Axel Ockenfels & Alvin E Roth, 2003. "An Experimental Analysis of Ending Rules in Internet Auctions," Levine's Bibliography 506439000000000433, UCLA Department of Economics.
    34. Charles R. Plott, 1997. "Laboratory Experimental Testbeds: Application to the PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 6(3), pages 605-638, 09.
    35. Alvin E Roth & Muriel Niederle, 2007. "Making Markets Thick: Designing Rules for Offers and Acceptances," Levine's Bibliography 843644000000000142, UCLA Department of Economics.
    36. Roth, Alvin E., 1982. "Incentive compatibility in a market with indivisible goods," Economics Letters, Elsevier, Elsevier, vol. 9(2), pages 127-132.
    37. Paul Milgrom, 2000. "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(2), pages 245-272, April.
    38. Ulrich Kamecke, 1993. "Wage Formation in a Centralized Matching Market," Discussion Paper Serie A, University of Bonn, Germany 422, University of Bonn, Germany.
    39. Muriel Niederle, 2006. "Competitive Wages in a Match with Ordered Contracts," NBER Working Papers 12334, National Bureau of Economic Research, Inc.
    40. Peter Cramton & Yoav Shoham & Richard Steinberg, 2004. "Combinatorial Auctions," Papers of Peter Cramton 04mit, University of Maryland, Department of Economics - Peter Cramton, revised 2004.
    41. Fuhito Kojima & Parag A. Pathak, 2009. "Incentives and Stability in Large Two-Sided Matching Markets," American Economic Review, American Economic Association, American Economic Association, vol. 99(3), pages 608-27, June.
    42. Sönmez, Tayfun & Pathak, Parag A. & Abdulkadiroglu, Atila & Roth, Alvin, 2005. "The Boston Public School Match," Scholarly Articles 2562764, Harvard University Department of Economics.
    43. 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.
    44. John Cawley, 2001. "A Guide (and Advice) for Economists on the U. S. Junior Academic Job Market," Labor and Demography, EconWPA 0109001, EconWPA, revised 27 Sep 2001.
    45. Muriel Niederle & Alvin E. Roth, 2007. "The Effects of a Centralized Clearinghouse on Job Placement, Wages, and Hiring Practices," NBER Working Papers 13529, National Bureau of Economic Research, Inc.
    46. Roth, Alvin, 2007. "Repugnance as a Constraint on Markets," Scholarly Articles 2624677, Harvard University Department of Economics.
    47. Alvin E. Roth, 2007. "Deferred Acceptance Algorithms: History, Theory, Practice, and Open Questions," NBER Working Papers 13225, National Bureau of Economic Research, Inc.
    48. Robert Wilson, 2002. "Architecture of Power Markets," Econometrica, Econometric Society, Econometric Society, vol. 70(4), pages 1299-1340, July.
    49. Atila Abdulkadiroglu & Yeon-Koo Che & Yosuke Yasuda, 2008. "Expanding "Choice" in School Choice," GRIPS Discussion Papers, National Graduate Institute for Policy Studies 08-17, National Graduate Institute for Policy Studies.
    50. Roth, Alvin E. & Sotomayor, Marilda, 1992. "Two-sided matching," Handbook of Game Theory with Economic Applications, Elsevier, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 16, pages 485-541 Elsevier.
    51. Roth, Alvin & Niederle, Muriel, 2005. "The Gastroenterology Fellowship Market: Should There Be A Match?," Scholarly Articles 2562766, Harvard University Department of Economics.
    52. 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, American Economic Association, vol. 81(3), pages 415-40, June.
    53. 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, MIT Press, vol. 115(1), pages 201-235, February.
    54. Alvin E. Roth, 2002. "The Economist as Engineer: Game Theory, Experimentation, and Computation as Tools for Design Economics," Econometrica, Econometric Society, Econometric Society, vol. 70(4), pages 1341-1378, July.
    55. 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, University of Chicago Press, vol. 111(6), pages 1342-1352, December.
    56. Abdulkadiroglu, Atila & Sonmez, Tayfun, 1999. "House Allocation with Existing Tenants," Journal of Economic Theory, Elsevier, Elsevier, vol. 88(2), pages 233-260, October.
    57. 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, University of Chicago Press, vol. 105(2), pages 284-329, April.
    58. 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, American Economic Association, vol. 21(3), pages 3-24, Summer.
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      by Liam Delaney in Geary Behaviour Centre on 2010-07-26 11:06:00
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