MArket Design

Ironing out behavioral wrinkles in economic engineering

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Papers

The Economist as  Engineer: Game Theory, Experimentation & Computation as Tools for Design Economics

-Alvin Roth

The first thesis of this paper is that, in the service of design, experimental and computational economics are natural complements to game theory.

Not only did this give economists a chance to employ what we know, it gave us a chance to learn practical lessons about design. [...] The second [...] we need to foster a still unfamiliar kind of design literature in economics, whose focus will be different than traditional game theory and theoretical mechanism design

Contributing to this literature requires active engagement with market makers:

• Questioning why (or if) particular features of the market were actively designed?
• Trying to understand where behavior in these markets is at odds from our assumption
• Making our tools and ideas useful to the designers

Increasingly, design of markets falling to practitioners (often non-economists):

• Reaching out and creating joint ventures can be mutually beneficial
  • Economists can:
    • discover new paradigms
    • document solutions
    • understand where assumptions fail
  • Academics can provide structure and best-practice from other settings