Experiments in Market Design

Abstract

As its name suggests, market design focuses on the design of marketplaces and institutions; it investigates how different rules and procedures affect the way markets function and allocate resources. With its practical impact on applications such as spectrum auctions, keyword auctions, school choice and kidney exchange, research in this field has greatly demonstrated how theoretical and experimental methods can influence policy making in the real world. Experiments in market design can serve as a wind-tunnel for new market mechanisms. They allow us to observe and evaluate the performance of a mechanism in the context of decision making faced by real people with real incentives. Often the need f..