Matching Market Design

564 Pages·2017·13.69 MB·English

by  Parag Pathak

AEA Continuing Education
Program

Matching Market
Design

Atila Abdulkadiroglu, Duke Univ.
Nikhil Agarwal, MIT
Parag Pathak, MIT

January 7-9, 2018
Matching Market Design
Course Introduction
Parag Pathak
MITandNBER
January 2018
Matching Market Design
Course Introduction
Parag Pathak
MITandNBER
January 2018
2/47
What is this about?
“A theory of an intelligently guided invisible hand”
Economist, 2007
Market design is a field of economics which attempts to devise practical
schemes for resource allocation problems
Mechanism design and matching theories underpin the field as a general
methodological framework. We will review some of the basics and then push
ahead to the frontier.
One of the strengths of this area is its tight connection to actual real-world
systems, so there will be discussion of institutions (“rules of the game”) and
empirical issues.
This course is intended to be an introduction and entryway to this literature.
We would like to make this as interactive as possible.
3/47
Prominent examples of matching market design
Labor market clearinghouses, especially in medicine [Roth,Niederle,etc]
Student assignment systems
(cid:73) US K-12, Higher ed systems around world [Abdulkadiro˘glu,Pathak,Roth,
S¨onmez,etc]
Clearinghouses for organ exchange
(cid:73) Kidneys, now livers and lungs [Ashlagi,Roth,S¨onmez,Unver,Ergin,etc]
Hybrid matching/auction systems used for personnel management
(cid:73) US Military Academy, ROTC [S¨onmez]
Refugee resettlement systems
(cid:73) Not yet designed, but some attempts [Andersson,Kominers,Teytleboym,etc.]
4/47
Course Overview
Co-taught with expert market designers
(cid:73) Atila Abdulkadirog˘lu, Duke
(cid:73) Nikhil Agarwal, MIT
Emphasis on link between theory and practice
Sunday
1 Overview and foundations
Monday
2 One-Sided Matching (Abdulkadirog˘lu)
3 Two-Sided Matching (Pathak)
4/5 School assignment: one-sided meets two-sided (Abdulkadirog˘lu/Pathak)
6 Organ Markets (Agarwal)
Tuesday
7 Revealed Preference in Matching Markets (Agarwal)
8 Matching in Richer Domains (Pathak)
9 Causal Inference with Matching Markets (Abdulkadirog˘lu)
5/47
Outline
1 Overview
Why design markets?
Design debates
2 Markets without Transfers
3 Why Centralize Markets?
4 Basic Mechanism Design and Strategy-proofness
Beyond F=ma: Economics to Engineering
Roth (EMA 2002): bridge building analogy
Consider the design of suspension bridges. Their simple physics, in which the
only force is gravity, and all beams are perfectly rigid, is simple, beautiful and
indispensable.
But bridge design also concerns metal fatigue, soil mechanics, and the
sideways forces of waves and wind. Many questions concerning these
complications cant be answered analytically, but must be explored using
physical or computational models.
These complications, and how they interact with that part of the physics
captured by the simple model, are the concern of the engineering literature.
Some of this is less elegant than the simple model, but it allows bridges
designed on the same basic model to be built longer and stronger over time,
as the complexities and how to deal with them become better understood.
6/47
Outline
1 Overview
Why design markets?
Design debates
2 Markets without Transfers
3 Why Centralize Markets?
4 Basic Mechanism Design and Strategy-proofness
Why design markets?
Invisible hand: markets can organize themselves efficiently
Markets are efficient under broad set of conditions (1st welfare theorem)
(cid:88) no externalities
Key idea: markets may be incomplete due to lack of prices
Remedies: Taxes, quotas, coasian solution
(cid:88) perfect information
(cid:88) perfect competition
Note: akin to asking why we need regulation/gov’t intervention
Even Hayek argued that what makes a market free is that it has rules that
allow it to work freely:
“There is, in particular, all the difference between deliberately creating a
system within which competition will work as beneficially as possible and
passively accepting institutions as they are.” The Road to Serfdom
7/47