Market design (Economics 426)

Course outline

Upcoming event: Final Exam

• The final exam is scheduled for Saturday December 12, 2-4pm.
• The test will focus on material we covered after the midterm (i.e. week 8-12, see below for a description). No aides, including calculators, are allowed.

Office hours annnouncement

• I will hold office hours on the following dates (always in GE 209)
  Tursday December 8 2-3pm
  Thursday December 10 3:30-5pm

Schedule

Week 1 (9/14)

Topics: Introduction; marriage market.

Lecture slides: Lecture 1 - Lecture 1 (full slides)

Readings:

1. Al Roth (2002) "The economis as engineer: game theory, experimentation, and computation as tools for design economics," Econometrica, Vol 70, pp 1341--1378. jstore link (accessible with utorid);
2. Gale Shapley (1962) "College Admissions and the Stability of Marriage", American Mathematical Monthly, Vol 69, pp. 9--15. jstore link (accessible with utorid);
3. "Stable matching: Theory, evidence, and practical design'' Information for the public, The prize in economic sciences, The Royal Swedish Academy of Sciences. Freely accessible link;
4. "Stable allocations and the practice of market design'' Scientific Background on the Sveriges Riksbank Prize inn Economic Sciences in Memory of Alfred Nobel 2012. Freely accessible link.

Week 2 (9/21)

Topics: NRMP, priority matching, incentive issues.

Lecture slides: Lecture 2 - Lecture 2 (full slides)

Readings:

1. Al Roth (1984) "The Evolution of the Labor Market for Medical Interns and Residents: A Case Study in Game Theory," Journal of Political Economy, 92, 991--1016. jstore link (accessible with utorid);
2. Al Roth and Elliott Peranson (1999), "The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design," American Economic Review, 89, 748--780. jstore link (accessible with utorid);

Week 3 (9/28)

Topics: externalities, many to one matching, housing market.

Lecture slides: Lecture 3 - Lecture 3 (full slides)

Readings:

1. Sonmez and Unver (2011) "Matching, Allocation, and Exchange of Discrete Resources," Handbook of Social Economics, 781--852. ssrn link (freely accessible);

Week 4 (10/5)

Topics: housing market, house allocation, house allocation with existing tenants, kidney exchange.

Lecture slides: Lecture 4 - Lecture 4 (full slides)

Readings:

1. Roth, Sonmez and Unver (2004) "Kidney Exchange," Quarterly Journal of Economics, 119, 457--488. jstore link (accessible with utorid);
2. Roth, Sonmez and Unver (2007) "Efficient Kidney Exchange: Coincidence of Wants in Markets with Compatibility-Based Preferences," American Economic Review, 97, 828--851. jstore link (accessible with utorid);

Week 5 (10/19)

Topics: kidney exchange.

Lecture slides: Lecture 5 - Lecture 5 (full slides)

Readings: See Week 4 readings.

Week 6 (10/26)

Topics: School choice.

Lecture slides: Lecture 6 - Lecture 6 (full slides)

Readings:

1. Abdulkadiroğlu and Sönmez (2003), "School Choice: A Mechanism Design Approach," American Economic Review, 93: 729-747. jstore link (accessible with utorid);
2. Abdulkadiroğlu, Pathak, and Roth (2009), "Strategyproofness versus Efficiency in Matching with Indifferences: Redesigning the NYC High School Match," American Economic Review, 99: 1954-1978. jstore link (accessible with utorid);
3. Abdulkadiroğlu, Pathak, Roth and Sönmez (2005), "The Boston Public School Match," American Economic Review, Papers and Proceedings, 95: 368--371. jstore link (accessible with utorid);
4. Abdulkadiroğlu, Pathak and Roth (2005), "The New York City High School Match," American Economic Review, Papers and Proceedings, 95: 364--367. jstore link (accessible with utorid);
5. Erdil and Ergin (2008), "What's the Matter with Tie-Breaking? Improving Efficiency in School Choice." American Economic Review, 98: 669-89. jstore link (accessible with utorid);

Week 7 (11/2)

Test: midterm test.

Week 8 (11/16)

Topics: Auctions.

Lecture slides: Lecture 7 - Lecture 7 (full slides)

Readings:

1. Paul Milgrom Putting Auction Theory to Work Chapter 1

Week 9 (11/23)

Topics: Revenue equivalence theorem.

Lecture slides: Lecture 8 - Lecture 8 (full slides)

Readings:

1. Jon Levin's notes on the revenue equivalence theorem
2. Paul Milgrom Putting Auction Theory to Work Chapter 2-3
(this is more advanced than our treatment in class)

Week 10 (11/30)

Topics: Common value auctions

Lecture slides: Lecture 9 - Lecture 9 (full slides)

Readings:

1. Hendricks and Porter (1988), "An Empirical Study of an Auction with Asymmetric Information," American Economic Review, 78: 78(5), 865--83. jstore link (accessible with utorid);

Week 11 (12/7)

Topics: multi-item auctions

Lecture slides: Lecture 10 - Lecture 10 (full slides)

Readings:

1. Ausubel, Cramton, Pycia, Rostek and Weretka (2013), "Demand Reductions and Inefficiency in Multi-Unit Auctions," working paper, freely accessible link;

Week 12 (12/9)

Topics: sponsored search auctions

Lecture slides: Lecture 11 - Lecture 11 (full slides)

Readings:

1. Varian (2007), "Position Auctions," International Journal of Industrial Organization, 25, 1163--78. Scholar Portal link (accessible with utorid);
2. Edelman, Ostrovsky and Schwarz (2007), "Position AuctionsInternet Advertising and the Generalized Second Price Auction," American Economic Review, 78: 97(1), 242--59. jstore link (accessible with utorid);

Assignments

Assignment #1 due by 11:59pm October 28, 2015.

Assignment #2 due by 11:59pm December 9, 2015.

Past Assignments

Assignment #1 - 2015S .

Assignment #2 - 2015S .

Assignment #1 - 2014S .

Assignment #2 - 2014S .

Past tests

Midterm Winter 2014.

Final Winter 2014.

Midterm Winter 2015.

Final Winter 2015.

Useful sites

Al Roth's Game Theory, Experimental Economics, and Market design page

Al Roth's Market Design Blog

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2012