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What Have We Learned From Market Design?

  • Alvin E. Roth

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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13530.

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Date of creation: Oct 2007
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Publication status: published as AlvinE. Roth, 2008. "What Have We Learned from Market Design?," Economic Journal, Royal Economic Society, vol. 118(527), pages 285-310, 03.
Handle: RePEc:nbr:nberwo:13530
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  1. Jeremy Bulow & Jonathan Levin, 2005. "Matching and Price Competition," NBER Working Papers 11506, National Bureau of Economic Research, Inc.
  2. 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.
  3. Saidman, Susan L. & Roth, Alvin E. & Sonmez, Tayfun & Unver, M. Utku & Delmonico, Francis L., 2014. "Increasing the Opportunity of Live Kidney Donation by Matching for Two and Three Way Exchanges," MPRA Paper 58247, University Library of Munich, Germany.
  4. 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, vol. 92(4), pages 1093-1103, September.
  5. 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.
  6. Abdulkadiroglu, Atila & Pathak, Parag Abishek & Roth, Alvin E., 2009. "Strategy-Proofness Versus Efficiency in Matching with Indifferences: Redesigning the NYC High School Match," Scholarly Articles 11077572, Harvard University Department of Economics.
  7. 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.
  8. Alvin E. Roth & Tayfun Sönmez, 2005. "A Kidney Exchange Clearinghouse in New England," American Economic Review, American Economic Association, vol. 95(2), pages 376-380, May.
  9. 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.
  10. 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.
  11. Alvin Roth, 2008. "Deferred acceptance algorithms: history, theory, practice, and open questions," International Journal of Game Theory, Springer;Game Theory Society, vol. 36(3), pages 537-569, March.
  12. 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.
  13. Peter Cramton, 1997. "The FCC Spectrum Auctions: An Early Assessment," Papers of Peter Cramton 97jemsfcc, University of Maryland, Department of Economics - Peter Cramton, revised 12 Jul 1998.
  14. Paul Klemperer, 2004. "Auctions: Theory and Practice," Online economics textbooks, SUNY-Oswego, Department of Economics, number auction1, December.
  15. Li, Hao & Rosen, Sherwin, 1998. "Unraveling in Matching Markets," American Economic Review, American Economic Association, vol. 88(3), pages 371-87, June.
  16. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
  17. Alvin E Roth & Muriel Niederle, 2007. "Making Markets Thick: Designing Rules for Offers and Acceptances," Levine's Bibliography 843644000000000142, UCLA Department of Economics.
  18. Atila Abdulkadiro?lu & Yeon-Koo Che & Yosuke Yasuda, 2015. "Expanding "Choice" in School Choice," American Economic Journal: Microeconomics, American Economic Association, vol. 7(1), pages 1-42, February.
  19. Sonmez, Tayfun, 1997. "Manipulation via Capacities in Two-Sided Matching Markets," Journal of Economic Theory, Elsevier, vol. 77(1), pages 197-204, November.
  20. 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.
  21. Pathak, Parag A. & Abdulkadiroglu, Atila & Roth, Alvin, 2005. "The New York City High School Match," Scholarly Articles 2562765, Harvard University Department of Economics.
  22. 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.
  23. Peter Cramton & Yoav Shoham & Richard Steinberg, 2004. "Combinatorial Auctions," Papers of Peter Cramton 04mit, University of Maryland, Department of Economics - Peter Cramton, revised 2004.
  24. 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.
  25. 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.
  26. 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.
  27. 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.
  28. 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.
  29. Alvin E. Roth & Tayfun Sönmez & M. Utku Ünver, 2004. "Pairwise Kidney Exchange," Game Theory and Information 0408001, EconWPA, revised 16 Feb 2005.
  30. Muriel Niederle & Alvin E Roth, 2003. "Unraveling Reduces Mobility in a Labor Market: Gastroenterology with and without a Centralized Match," Levine's Working Paper Archive 506439000000000428, David K. Levine.
  31. 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.
  32. Roth, Alvin & Ünver, M. Utku & Sönmez, Tayfun, 2004. "Kidney Exchange," Scholarly Articles 2580565, Harvard University Department of Economics.
  33. 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.
  34. Ulrich Kamecke, 1993. "Wage Formation in a Centralized Matching Market," Discussion Paper Serie A 422, University of Bonn, Germany.
  35. 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.
  36. Muriel Niederle, 2007. "Competitive Wages in a Match with Ordered Contracts," American Economic Review, American Economic Association, vol. 97(5), pages 1957-1969, December.
  37. Alvin E. Roth, 2006. "Repugnance as a Constraint on Markets," Levine's Bibliography 321307000000000629, UCLA Department of Economics.
  38. Roth, Alvin E. & Sonmez, Tayfun & Unver, Utku & Delmonico, Francis & Saidman, Susan L., 2014. "Utilizing List Exchange and Non-directed Donation through “Chain” Paired Kidney Donations," MPRA Paper 58246, University Library of Munich, Germany.
  39. Plott, Charles R., 1996. "Laboratory Experimental Testbeds: Application to the PCS Auction," Working Papers 957, California Institute of Technology, Division of the Humanities and Social Sciences.
  40. 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.
  41. Roth, Alvin E, 1991. "Game Theory as a Part of Empirical Economics," Economic Journal, Royal Economic Society, vol. 101(404), pages 107-14, January.
  42. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
  43. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721, November.
  44. Sönmez, Tayfun & Pathak, Parag A. & Abdulkadiroglu, Atila & Roth, Alvin, 2005. "The Boston Public School Match," Scholarly Articles 2562764, Harvard University Department of Economics.
  45. 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.
  46. Paul Milgrom, . "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Working Papers 98002, Stanford University, Department of Economics.
  47. 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.
  48. 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, Oxford University Press, vol. 115(1), pages 201-235.
  49. 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.
  50. 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.
  51. Robert Wilson, 2002. "Architecture of Power Markets," Econometrica, Econometric Society, vol. 70(4), pages 1299-1340, July.
  52. Roth,Alvin E. & Sotomayor,Marilda A. Oliveira, 1992. "Two-Sided Matching," Cambridge Books, Cambridge University Press, number 9780521437882, November.
  53. Abdulkadiroglu, Atila & Sonmez, Tayfun, 1999. "House Allocation with Existing Tenants," Journal of Economic Theory, Elsevier, vol. 88(2), pages 233-260, October.
  54. Georgy Artemov, 2008. "Matching and price competition: would personalized prices help?," International Journal of Game Theory, Springer;Game Theory Society, vol. 36(3), pages 321-331, March.
  55. Shapley, Lloyd & Scarf, Herbert, 1974. "On cores and indivisibility," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 23-37, March.
  56. Atila Abdulkadiroglu & Tayfun Sönmez, 2003. "School Choice: A Mechanism Design Approach," American Economic Review, American Economic Association, vol. 93(3), pages 729-747, June.
  57. 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.
  58. Roth, Alvin E., 1982. "Incentive compatibility in a market with indivisible goods," Economics Letters, Elsevier, vol. 9(2), pages 127-132.
  59. 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.
  60. Gary S. Becker & Julio Jorge Elías, 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.
  61. Kandel, Eugene & Rindi, Barbara & Bosetti, Luisella, 2012. "The effect of a closing call auction on market quality and trading strategies," Journal of Financial Intermediation, Elsevier, vol. 21(1), pages 23-49.
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