Designing Markets with Complementarities

点击翻译按钮获取中文摘要

Many real-world markets would function poorly if they did not have clear rules and coordinated transactions. The supply of generated electricity must match demand at all times otherwise there will be rolling blackouts. If local authorities do not centralise primary school admissions, many parents would be pressured into accepting places in schools where their children would not thrive. If the government gives away mobile spectrum licenses for free, then spectrum might not end up with telecoms companies that can provide the best service for the public.Many markets can be drastically improved using insights from a branch of economics called "market design". Market designers use economic theory to develop market rules and create infrastructure that facilitates market transactions. Company shares, commodities, and even electricity are traded in organised exchanges. Centralized two-sided matching markets are used to match doctors to hospitals, children to schools and universities, one incompatible kidney donor-patient pair to another, and army cadets to branches of service. Auctions are used to find the most willing buyers for swathes of mobile spectrum, precious antiques, and search engine adverts. Market designers have created many ways to design markets that superbly allocate similar (identical or substitutable) items. These include auctions for antiques and preference-based matching systems used by local authorities to allocate children to primary schools. But one particular feature that drastically complicates the design of markets is complementarity. Things are complements when the value of them together is greater than the sum of their individual parts. Coming back to an example above, suppose that the government wanted to sell mobile spectrum licenses. Telecoms companies value nearby licenses a great deal as it allows them to provide a better service for customers. Should the government bundle nearby licenses together or sell them separately? Now suppose that in order to sell spectrum licenses to telecoms companies the government first has to buy these spectrum licenses from hundreds of television stations. Should the government buy and sell these licenses at the same time? Finally, suppose that the government could also move some television stations to broadcast on other parts of the spectrum. Which stations should it move while avoiding broadcast interference? Answering all these questions involves tackling different types of complementarity.There are other examples of real-world markets with complementarities. Property developers bidding in a land auction often want to buy adjacent plots of land. Boat captains often want to exchange some of their fishing quota for quota of other species. In order to avoid blackouts, the electricity grid operator has to make sure that certain fossil fuel and renewable generators are producing energy at the same time.These examples make clear that in the presence of complementarities market design can be crucial to ensure the market works well. Coordination is required to ensure that as many of the complementary transactions take place as possible. However, when there are complementarities, simple, classic auctions and matching algorithms can fail dramatically. Therefore new theoretical tools are needed.In this work, I develop new theoretical and practical tools - auctions, matching markets, and trading networks - to design markets with different types of complementarity. I also test one new auction in a series of laboratory experiments. This work has a number of important applications for the redesign of many existing markets and for the design of new ones, including markets for biodiversity conservation, peer-to-peer energy trading, auctions and exchanges of fishing quota, and matching systems for the allocation of resettled refugees.