Auctions and Matching
A broad overview of market mechanisms, with an emphasis on the interplay between theory and real-life applications; examples range from eBay auctions to school choice.
This book offers an introduction to market design, providing students with a broad overview of issues related to the design and analysis of market mechanisms. It defines a market as a demand and a supply, without specifying a price system or mechanism. This allows the text to analyze a broad set of situations—including such unconventional markets as college admissions and organ donation—and forces readers to pay attention to details that might otherwise be overlooked. Students often complain that microeconomics is too abstract and disconnected from reality; the study of market design shows how theory can help solve existing, real-life problems. The book focuses on the interplay between theory and applications. To keep the text as accessible as possible, special effort has been made to minimize formal description of the models while emphasizing the intuitive, with detailed explanations and resolution of examples. Appendixes offer general reviews of elements of game theory and mechanism design that are related to the themes explored in the book, presenting the basic concepts with as many explanations and illustrations as possible.
The book covers topics including the basics of simple auctions; eBay auctions; Vickrey–Clarke–Groves auctions; keyword auctions, with examples from Google and Facebook; spectrum auctions; financial markets, with discussions of treasury auctions and IPOs; trading on the stock market; the basic matching model; medical match; assignment problems; probabilistic assignments; school choice; course allocation, with examples from Harvard and Wharton; and kidney exchange.
With the practical impact on real life applications such as keyword auctions, spectrum auctions, school choice, and kidney exchange, the field of market design has been changing the perception that research on economic theory has to be out of touch with reality. Kudos to Guillaume Haeringer for this rigorous and yet simple presentation of the basics on auctions and matching, as well as some of the biggest achievements of market design.
Tayfun Sönmez, Professor of Economics, Boston College
Haeringer's Market Design is a wonderful introduction to how markets work and how they can be improved. It brings the tools of economics to life by interweaving theory with important applications. Market Design is a must-read for anyone studying, regulating, or improving market institutions.
Peter Cramton, Professor of Economics, University of Maryland and University of Cologne