Market Design: Theory and Pragmatics
For the last several centuries, markets have spread spontaneously and have organized an increasing share of human activity. Globalization and information technologies accelerated the process in the early 21st century, and at the same time, opened unprecedented new opportunities for deliberate design. Market design has much to learn from success stories like Amazon and eBay. Market designers can also learn from disasters such as the California energy market of May 2000 through September 2001, and the credit-default swap market freeze in September 2008. Market design is a multi-disciplinary problem with relevant expertise coming from economic theory, computer science, and operations research. Advances are made with the right combination of theory and pragmatics, with theoretical ideals balanced against requirements for computational and informational efficiency, as well as simplicity and robustness. The research project 'Market design' at the WZB pursues fundamental theoretical investigations about effective market design as well as a pragmatic line of enquiry that examines the role of actual behavior, mainly through laboratory experiments.