Economics 415: Market Design
[Syllabus]

Professor Peter Cramton

Tuesday and Thursday, 11 am to 12:15 pm, Tydings 0111, Spring 2006

Economists increasingly are asked to design markets in restructured industries to promote desirable outcomes. This course studies the new field of market design. The ideas from game theory and microeconomics are applied to the design of effective market rules. Examples include electricity markets, spectrum auctions, environmental auctions, and auctions of takeoff and landing slots at congested airports. The emphasis is on both the design of high-stake auction markets and bidding behavior in these markets.

Prerequisite: A vivid imagination and a tolerance for abstraction are essential prerequisites for this course. In addition, Economics 414 (Game Theory) or consent of the instructor is required of all students. If you struggled in Economics 414 (C or worse), then this course is not for you.


Course Materials

Textbook:

Combinatorial Auctions, MIT Press, 2006
Peter Cramton, Yoav Shoham, and Richard Steinberg (editors)

Amazon MIT Press [Or may be purchased in class.]

Web exercises can be found at http://gametheory.tau.ac.il/student/. Your user name is CR623U<email>, where <email> is your email address (e.g., CR623Ustudent@email.com). The class password is t458441Vt. It is case sensitive.

Project Assignment Project Ideas Presentation Schedule
Sample Papers: Airport Slot Allocation, Fantasy Baseball, FCC Package Auctions, Internet Auctions, International Conflict, Pool House Rules

Web Exercise 1 Web Exercise 2 Web Exercise 3 Web Exercise 4 Web Exercise 5

Auction Rules Exercise Problem Set Problem Set Answers Topics

* indicates papers emphasized in class.

*McAfee, R. Preston and John McMillan. 1987. “Auctions and Bidding,” Journal of Economic Literature, 25, 699-738. [presentation]

*Cramton, Peter. 2001. “Auction Design and Strategy,” Presentation, University of Maryland.

*Ausubel, Lawrence M. and Peter Cramton, “Mock Auction of Arrival/Departure Slots at LaGuardia Airport.”

Cramton, Peter. 1998. “Ascending Auctions,” European Economic Review, 42, 745-756. [presentation]

Lawrence M. Ausubel and Peter Cramton, “Auctioning Many Divisible Goods,” Journal of the European Economic Association, 2, 480-493, April-May 2004.

Ausubel, Lawrence M. and Peter Cramton. 2002. “Demand Reduction and Inefficiency in Multi-Unit Auctions,” Working Paper, University of Maryland. [presentation]

*Ausubel, Lawrence M. and Peter Cramton. 1999. “The Optimality of Being Efficient,” Working Paper, University of Maryland. [presentation]

Cramton, Peter. 1997. “The FCC Spectrum Auctions: An Early Assessment,” Journal of Economics and Management Strategy, 6:3, 431-495.

Ausubel, Lawrence M., Peter Cramton, R. Preston McAfee, and John McMillan. 1997. “Synergies in Wireless Telephony: Evidence from the Broadband PCS Auctions,” Journal of Economics and Management Strategy, 6:3, 497-527.

Cramton, Peter. 2000. “Lessons from the United States Spectrum Auctions,” Prepared Testimony of Peter Cramton before the United States Senate Budget Committee, February.

*Cramton, Peter. 2002. “Spectrum Auctions,” in Martin Cave, Sumit Majumdar, and Ingo Vogelsang, eds., Handbook of Telecommunications Economics, Amsterdam: Elsevier Science B.V., Chapter 14, 605-639, 2002. [Presentation]

*Cramton, Peter and Jesse Schwartz. 2003. “Collusive Bidding in the FCC Spectrum Auctions,” Contributions to Economic Analysis & Policy, 1:1. [presentation]

Borgers, Tilman and Christian Dustmann. 2002. “Rationalizing the UMTS Spectrum Bids: The Case of the UK Auction,” Working Paper, University College London.

Jehiel, Philippe and Benny Moldovanu. 2001. “The European UMTS/IMT-2000 License Auctions,” Working Paper, University of Mannheim.

Klemperer, Paul. 2002. “What Really Matters in Auction Design?” Journal of Economic Perspectives, 16:1, 169-189.

Roth, Alvin E., Web Site covering market design, especially matching.

*Immorlica, Nicole and Mohammad Mahdian, “Marriage, Honesty, and Stability,” presentation, 2005.

*Ausubel, Lawrence M. and Paul Milgrom. 2002. “Ascending Auctions with Package Bidding,” Frontiers of Theoretical Economics: Vol. 1: No. 1, Article 1. http://www.bepress.com/bejte/frontiers/vol1/iss1/art1. [presentation]

*Ausubel, Lawrence M., Peter Cramton, and Paul Milgrom, “The Clock-Proxy Auction: A Practical Combinatorial Auction Design,” in Peter Cramton, Yoav Shoham, and Richard Steinberg (eds.), Combinatorial Auctions, Chapter 5, MIT Press, 2006. [presentation]

*“The Convergence of Market Designs for Adequate Generating Capacity,” (with Steven Stoft), Working Paper, University of Maryland, March 2006. [presentation]

Cramton, Peter, Evan Kwerel, and John Williams. 1998. “Efficient Relocation of Spectrum Incumbents,” Journal of Law and Economics, 41, 647-675.

Cramton, Peter and Suzi Kerr. 2002. “Tradeable Carbon Permit Auctions: How and Why to Auction Not Grandfather,” Energy Policy, 30, 333-345, 2002.

Roth, Alvin E. and Axel Ockenfels. 2002. “Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet,” American Economic Review, 92, 1093-1103.

Kahn, Alfred E., Peter Cramton, Robert H. Porter, and Richard D. Tabors. 2001. “Pricing in the California Power Exchange Electricity Market: Should California Switch from Uniform Pricing to Pay-as-Bid Pricing?” Blue Ribbon Panel Report, California Power Exchange.

Wolak, Frank A.. 2001. “What Went Wrong in California’s Restructured Electricity Market?” Presentation at AEI.

Borenstein, Severin, James Bushnell and Frank Wolak. 2001. “Measuring Market Inefficiencies in California’s Restructured Wholesale Electricity Market,” Working Paper, Stanford University.