Competitive markets can fail in the "natural monopoly" context and/or be ruled out for ethical or political reasons. This problem can be compounded by the destructive imbalance of coalitional power. Modern research in Market Design offers many remedies in the form of simple mechanisms for allocating private resources: auctions as well as moneyless matching markets (widely applied for university admission or public housing ) and a variety of voting rules for collective decision making.

Lectures: 10 x 2-hour lectures

Tutorials: 10 x 1-hour tutorials

On campus

None

None

1. In-course exam: in-person; Individual; 75 minutes; 30%; ILOs 1-4.
2. Degree exam: in-person; Individual; 120 minutes; 70%; ILOs 1-4.

The main aims of the course are:

■ To present the formal models of cooperative behavior known as core stability, both from the normative viewpoint of sharing the benefits of cooperation, and the positive analysis of coalition formation.

■ To show the significance of the problem of market failure and demonstrate the need for market design.

■ To introduce students to specific applications of market design in bilateral matching and voting.

By the end of this course students will be able to:

1. Demonstrate understanding of the central concept of core stability for modelling cooperation in microeconomic contexts.

2. Explain and show the necessity of market design in various economic situations; demonstrate familiarity with a variety of specific mechanisms.

3. Apply knowledge and understanding of the concepts and models of cooperation and mechanism design by successful problem solving.

4. Recognise situations where market design approach is appropriate, and build adequate models for such situations, isolate desirable properties of an outcome and propose appropriate mechanisms.