ECO 2801: Auctions and Market Design / ECON 5115: Market Design

Abstract

First note that this course is jointly offered to graduate students in Master of Science in Quantitative Economics and undergraduate students in Yeshiva College; undergraduate students are also expected to follow rigorous mathematical treatments of economic theory. This course introduces basic results in market design, a subfield of microeconomic theory where researchers propose desirable and often practical solutions to allocation problems in reality. Due to such a practical nature of this topic, students should become able to propose appropriate solutions by themselves to various allocation problems. We first study allocation problems with monetary transfers. To familiarize students with the analysis of incomplete information models, we initially focus on a seller facing a single privately informed buyer. We then turn to the main component of this part: multiple privately informed buyers, or auctions. We first study the classical, stylized theory of auctions. We then depart from the classical framework and observe what kinds of practical and theoretical difficulties arise and how successfully current attempts deal with these difficulties. As applications, we will discuss Dutch flower auctions, M&A auctions, oil and gas lease auctions, US treasury bill auctions, spectrum auctions, and internet advertising auctions (as in Google and Bing). The second part of this course covers allocation without money. We start from the matching problem (aka the marriage problem) and its solution concept, stable matching. After reviewing the applications of stable matching, we compare it with alternative approaches, such as top trading cycles. We will discuss applications including medical residency match, school choice, course allocation, and kidney exchange.