An invitation to market design

Journal article

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 programmes; 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.

Authors: Kominers, S; Teytelboym, A; Crawford, V

• Publication status: Published
• Peer review status: Peer reviewed
• Publisher: Oxford University Press
• Journal: Oxford Review of Economic Policy
• Volume: 33
• Issue: 4
• Pages: 541-571
• Publication date: 2017-11-02
• Acceptance date: 2017-10-26
• DOI: 10.1093/oxrep/grx063
• EISSN: 1460-2121
• ISSN: 0266-903X
• Keywords: scrip; marketplaces; allocation rules; efficiency; matching; liquidity; trading; market design; auctions; equity