Business Economics MA(SocSci)

Market Failures and Mechanism Design ECON4056

  • Academic Session: 2023-24
  • School: Adam Smith Business School
  • Credits: 15
  • Level: Level 4 (SCQF level 10)
  • Typically Offered: Either Semester 1 or Semester 2
  • Available to Visiting Students: Yes

Short Description

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.


10 x 2-hour lectures

Additional 2 hour revision session outwith regular teaching

10 x 1 hour tutorials, one per week

Excluded Courses





ILOs 1-4 are assessed in a 1-hour in-course exam (30%) and a 2-hour degree examination (70%) 

ILO (covered)



Word Length/Duration


In-Course exam


1 hour

Main Assessment In: December and April/May

Are reassessment opportunities available for all summative assessments? No

Reassessments are normally available for all courses, except those which contribute to the Honours classification. For non-Honours courses, students are offered reassessment in all or any of the components of assessment if the satisfactory (threshold) grade for the overall course is not achieved at the first attempt. This is normally grade D3 for undergraduate students and grade C3 for postgraduate students. Exceptionally it may not be possible to offer reassessment of some coursework items, in which case the mark achieved at the first attempt will be counted towards the final course grade. Any such exceptions for this course are described below. 

Course Aims

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.

Intended Learning Outcomes of Course

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.

Minimum Requirement for Award of Credits

Students must submit at least 75% by weight of the components (including examinations) of the course's summative assessment.