An Invitation to Market Design

45 Pages Posted: 6 Sep 2017

See all articles by Scott Duke Kominers

Scott Duke Kominers

Harvard University; a16z crypto

Alexander Teytelboym

University of Oxford - Oxford Martin School

Vincent P. Crawford

University of Oxford

Date Written: September 4, 2017

Abstract

Market design seeks to translate economic theory and analysis into practical solutions to real-world problems. By redesigning both the rules that guide market transactions and the infrastructure that enables those transactions to take place, market designers can address a broad range of market failures. In this paper, we illustrate the process and power of market design through three examples: the design of medical residency matching programs; a scrip system to allocate food donations to food banks; and the recent “Incentive Auction” that reallocated wireless spectrum from television broadcasters to telecoms. Our lead examples show how effective market design can encourage participation, reduce gaming, and aggregate information, in order to improve liquidity, efficiency, and equity in markets. We also discuss a number of fruitful applications of market design in other areas of economic and public policy.

Keywords: matching, auctions, trading, scrip, liquidity, efficiency, equity, allocation rules, marketplaces, market design

Suggested Citation

Kominers, Scott Duke and Teytelboym, Alexander and Crawford, Vincent P., An Invitation to Market Design (September 4, 2017). Harvard Business School Entrepreneurial Management Working Paper No. 18-019, Available at SSRN: https://ssrn.com/abstract=3032458 or http://dx.doi.org/10.2139/ssrn.3032458

Scott Duke Kominers (Contact Author)

Harvard University ( email )

Rock Center
Harvard Business School
Boston, MA 02163
United States

HOME PAGE: http://www.scottkom.com/

a16z crypto ( email )

Alexander Teytelboym

University of Oxford - Oxford Martin School ( email )

University of Oxford
34 Broad Street
Oxford, OX1 3BD
United Kingdom

Vincent P. Crawford

University of Oxford ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

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