Market Design: Auctions and Matching Algorithms
This is an introductory course in market design for Masters students with a focus on matching markets. In matching markets, supply and demand are often not exclusively coordinated by prices, but by other criteria. Prominent examples include personal preferences of market participants in the sharing economy, as well as in education and labour markets, where both sides have to choose each other, i.e. employees cannot just choose their employer, they also have to be chosen (and vice versa).
Course material
| Week | Lectures | Topics | Textbook | Problem sets |
|---|---|---|---|---|
| 1 | Introduction [Slides, Handout] |
What determines a market. Limited role of prices. Feeding America as an example of market design.
|
Ch. 1 | -- |
| 2 | The basic matching model [Slides, Handout] |
Marriage model. Stability, Deferred Acceptance, strategyproofness. Man/woman-optimal matchings and polarization of preferences. Blocking lemma.
|
Ch. 9 | The basic matching model [Exercises, Solutions] |
| 3 | The medical match [Slides, Handout] |
Introduction of the many-to-one model, Roth's analysis of the UK market and the experiment with Kagel, Rural Hospital Theorem, decomposition lemma. History of NRMP and couples problem.
|
Ch. 10 | The medical match [Exercises, Solutions] |
| 4 | Assignment markets [Slides, Handout] |
One-to-one model. Efficiency. Serial Dictatorship, Top Trading Cycles. House allocation (priave/public/mixed endowments).
|
Ch. 11 | Assignment markets [Exercises, Solutions] |
| 5 | School choice [Slides, Handout] |
The Many-to-one assignment model. Immediate Acceptance (Boston), DA, TTC. Short review of Boston and NYC school match.
|
Ch. 13 | School choice [Exercises, Solutions] |
| 6 | Course allocation [Slides, Handout] |
Bidding for courses. HBS draft mechanism. Approximate competitive equilibrium with equal incomes, Budish-Kessler experiment.
|
Ch. 15 | Course allocation [Exercises, Solutions] |
| 7 | Kidney exchange [Slides, Handout] |
Trades v. waiting list, kidney exchange algorithm (QJE version). Efficency and incentives.
|
Ch. 16 | Kidney exchange [Exercises, Solutions] |
Textbook
Haeringer, G. (2018). Market Design: Auctions and Matching. The MIT Press.