Market Design

Catalog description

Traditional economics studies how markets price and allocate scarce resources, and how prices adjusts to equalize supply and demand. While markets may work well, there are many cases where the market mechanism fails and intervention is required. Worse, there are also cases where prices and, and hence money transfers, cannot be used to properly allocate resources. Economists are more and more involved in designing markets or institutions. Examples abound nowadays. For institutions where money transfers are possible, economists have been at the forefront of the design of auction mechanisms -e.g. to sell radio spectrum, diamonds, electricity etc. For cases where money transfers are not possible, economists have designed market-like mechanisms to allocate resources -e.g. assigning students to schools, assigning organ transplants such as kidneys, assigning seats to courses in college. The course will illustrate how microeconomic theory is used effectively and practically to solve important resource allocation problems, in instances where there were no good solutions prior to the microeconomist' help.