Saturday, 7 May 2011

Milgrom looks at market design

Paul Milgrom has an article in Economic Inquiry (Vol. 49, No. 2, April 2011) on "Critical Issues in the Practice of Market Design". The abstract reads:
The years since 1994 have witnessed the emergence of market design as a new discipline within economics, in which research and practice exert powerful mutual influences in matching and auction markets. The problem of designing well-functioning auction markets has led economic designers to revisit such fundamental issues as the definitions of commodities, the ways participants communicate with markets, the trade-offs between the incentives provided for truthful reporting and other attributes of mechanism performance, and the determinants of the scope of markets, especially whether and how trade in different goods is linked.
I has always wondered about the relationship between market design and mechanism design. On this Milgrom writes,
In the decade or so before 1994, the field of mechanism design was already established
as a leading field of research in economic theory and game theory, but the focus on applications in the years that followed widened the range of questions being asked. As Roth (2002) has emphasized, market design is a kind of economic engineering and demands a comprehensive attention to implementation questions, including ones beyond the traditional scope of research in mechanism design theory.
Checkout page 318, the export market for powdered milk from New Zealand gets a mention.

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