Market Design: Understanding Markets Well Enough to Fix Them When They’re Broken

6 Pages Posted: 9 Aug 2011

See all articles by Alvin E. Roth

Alvin E. Roth

Dept. of Economics, Stanford University; National Bureau of Economic Research (NBER)

Date Written: September 8, 2010


In the past fifteen years, the emerging field of Market Design has solved important practical problems, and clarified both what we know and what we don’t yet know about how markets work. The challenge is to understand complex markets well enough to fix them when they’re broken, and implement new markets and market-like mechanisms when needed.

Among markets that economists have helped design are multi-unit auctions for complementary goods such as spectrum licenses; computerized clearinghouses such as the National Resident Matching Program, through which most American doctors get their first jobs; decentralized labor markets such as those for more advanced medical positions and for academic positions; school choice systems; and kidney exchange, which allows patients with incompatible living donors to exchange donor kidneys with other incompatible patient-donor pairs.

These markets differ from markets for simple commodities, in which, once prices have been established, everyone can choose whatever they can afford. Most of these markets are matching markets, in which you can’t just choose what you want, you also have to be chosen. One of the scientific challenges is to learn more about the workings of complex matching markets, such as labor markets for professionals, college admissions, and marriage.

Suggested Citation

Roth, Alvin E., Market Design: Understanding Markets Well Enough to Fix Them When They’re Broken (September 8, 2010). American Economic Association, Ten Years and Beyond: Economists Answer NSF's Call for Long-Term Research Agendas, Available at SSRN: or

Alvin E. Roth (Contact Author)

Dept. of Economics, Stanford University ( email )

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National Bureau of Economic Research (NBER)

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