Market Design (MD)
Michael Ostrovsky and Parag Pathak, Directors
Over the past two decades, economic research and ideas have played an increased role in the practical organization and design of markets. Some examples include auctions for spectrum, electricity, Treasury bills, timber, and other commodities; tradable permit systems for pollution abatement and other environmental regulations; internet search advertising; market mechanisms for innovation; labor market clearinghouses; centralized systems for the allocation of organs; formal procedures for student assignment; and other related matching and trading processes. In each of these cases, both theory and empirical and experimental research have influenced the design of market institutions.
"Market design" examines the reasons why markets institutions fail and considers the properties of alternative mechanisms, in terms of efficiency, fairness, incentives, and complexity. Research on market design is influenced by ideas from industrial organization and microeconomic theory; it brings together theoretical, empirical, and experimental methods, with an aim of studying policy-relevant tradeoffs with practical consequences. The NBER's Market Design Working Group, established in the fall of 2008, seeks to create a forum for bringing together leading researchers in the field of Market Design. To encourage research on Market Design, the Working Group will host a series of workshops where new work will be presented.