Market design

Methodology for creation of markets Market design is a branch of economics that focuses on establishing rules of exchange, meaning who gets allocated what and by what procedure, in order to achieve efficient and equitable outcomes. It is closely related to mechanism design and auction theory. Market design is concerned with the workings of particular markets in order to fix them when they are broken or to build markets when they are missing. Practical applications of market design theory, pioneered by scholars like Alvin Roth, have included labor market matching (e.g. the national residency match program), organ transplantation, school choice, and university admissions. Auction theory Early research on auctions focused on two special cases: common value auctions in which buyers have private signals of an items true value and private value auctions in which values are identically and independently distributed. Milgrom and Weber (1982) present a much more general theory of auctions with positively related values. Each of n buyers receives a private signal x i {\displaystyle {{x}_{i}}} . Buyer i’s value ϕ ( x i , x − i ) {\displaystyle \phi ({{x}_{i}},{{x}_{-i}})} is strictly inc