Market Design and Auctions

Market design studies how to design rules for allocating resources or to structure successful marketplaces. While heavily relying on the tools of game theory and mechanism design, it also seeks to identify why certain market rules or institutions succeed and why others fail. Market design models both ordinal preference and cardinal preference environments and builds on concepts such as strategy-proofness and Bayesian incentive compatibility. Typical objectives of the designers are to maximize efficiency, revenue, and stability or to minimize collusion. In the economic environments market design is mainly interested in, decentralized markets do not work well, mainly either because market prices do not exist or convey all relevant information or decentralized markets work too slowly. One very important application of game theory and market design is the study of auctions. Auctions have been proposed, and have frequently been used, as convenient and attractive mechanisms for the sale of a variety of items.

This section focuses on the recent developments in the fields of market design and auctions. It will cover mainly theoretical work that is heavily motivated by practical applications, such as school choice, assignment problems, matching with contracts, combinatorial auctions, asymmetric auctions and auctions with interdependent values.