How Market Design Emerged from Game Theory: A Mutual Interview

Fascinating mutual interview of Al Roth and Robert Wilson in the new edition of Journal of Eco Perspectives.

To jog our memories about the history and development of game theory and how it shaped and was reshaped by market design, we interviewed each other over coffee during Fall 2018. We also touched on what we think has been learned about markets and marketplaces by trying to design them.

What emerged from our discussion is that, when we learned game theory, games were modeled either in terms of the strategies available to the players (“noncooperative game theory”) or in terms of the outcomes that could be attained by coalitions of players (“cooperative game theory”), and these were viewed as models appropriate for different kinds of games. In either case, the particular model was viewed as a mathematical object that could be viewed in its entirety by the theorist.

Market design, however, has come to view these models as complementary approaches for examining different ways in which marketplaces operate within their economic environment. And, because that environment can be complex, there will be aspects of the game that are not entirely observable.

Mathematical models themselves play a less heroic, stand-alone role in market design than in the theoretical mechanism design literature. A lot of other kinds of investigation, communication, and persuasion play a role in crafting a workable design and in helping it to be adopted and implemented, and then maintained and adapted.

As good as it can get…

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One Response to “How Market Design Emerged from Game Theory: A Mutual Interview”

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    How Market Design Emerged from Game Theory: A Mutual Interview – Central-Banks

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