Official Matters

Economics 704 is the second half of the Economics Department’s two-semester sequence in Advanced Microeconomics, intended for second-year Ph.D. students.  (Economics 703, the first half of the sequence, is taught by Professor Peter Cramton in the fall semester.)  In Spring 2010, the course will focus on auction theory, matching theory, and the relationship between auction theory and matching theory.  The auction theory component particularly focuses on the study of multi-unit auctions, including clock auctions and combinatorial auctions. The matching theory component contains treatments of one-to-one and many-to-one matching, including applications to the medical intern match, school choice, and kidney exchange.  Two new topics that may be included in Spring 2010 are: design of proxy bidders for multi-unit auctions; and common-value auctions with liquidity-constrained bidders.  Depending on student demand, I am also contemplating spending the last 1 to 2 weeks on models that relax common-knowledge assumptions and are thereby able to reach interesting conclusions on no-trade theorems, asset bubbles, and trading collapses. Other topics that have been treated in some years include: sequential bargaining under incomplete information; and equilibrium refinements.

All official course announcements will be posted on the course home page:

http://www.ausubel.com/econ704

Some of the course materials will reside in a password-protected area.  If you do not already have the username and password, please email the professor to obtain it. 

Class will not meet on Tuesday April 27, 2010.  The makeup time will be determined in class.

Texts

    Required:

V. Krishna, Auction Theory (2nd edition), Academic Press, 2010.

A. E. Roth and M. Sotomayor, Two-Sided Matching: A Study in Game-Theoretic Modeling and Analysis, Cambridge Univ. Press, 1992 (paperback).

    Recommended:

P. Milgrom, Putting Auction Theory to Work, Cambridge University Press, 2004 (paperback).

    ... and a variety of articles.

Course Times

Tuesdays/Thursdays 2:00 pm - 3:15 pm, Tydings 2102.

Office Hours

Tuesdays/Thursdays 11:00 am - 12:00 noon, Tydings 4130C.

Preliminary Syllabus (approximately two weeks per topic)

(* = paper will receive particular emphasis in class)

1. Auction Theory I: Single Items

   * Ausubel, L. (2003), “Auction Theory for the New Economy” (short survey aimed toward grad students), Sections 1-3

      Krishna, V., Auction Theory, Chapters 3, 6, 7, 9

      McAfee, P. and J. McMillan (1987), “Auctions and Bidding,” Journal of Economic Literature, 25: 699–738

   * Maskin, E. (1992), “Auctions and Privatization,” in Horst Siebert, ed., Privatization: Symposium in Honor of Herbert Giersch. Tubingen: Mohr (Siebeck), 115–136

   * Milgrom, P. and R. Weber (1982), “A Theory of Auctions and Competitive Bidding,” Econometrica, 50: 1089-1122; and additional pages from Milgrom (1987) on the Linkage Principle

      Cremer, J. and R. McLean (1985), “Optimal Selling Strategies under Uncertainty for a Discriminating Monopolist when Demands are Interdependent,” Econometrica, 53: 345-362

   * Edelman, B., M. Ostrovsky and M. Schwarz (2007), “Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords,” American Economic Review, 97(1): 242-259

    

2. Auction Theory II: Multiple Identical Items

   * Ausubel, L. (2003), “Auction Theory for the New Economy” (short survey aimed toward grad students), Sections 4-5

      Krishna, V., Auction Theory, Chapters 12-14

   * Vickrey, W. (1961), “Counterspeculation, Auctions, and Competitive Sealed Tenders,” Journal of Finance, 1961, 16: 8-37

   * Ausubel, L. (2004), “An Efficient Ascending-Bid Auction for Multiple Objects,” American Economic Review, 94(5): 1452-1475

      Ausubel, L. and T. Morrill (2008), “The Hungarian Auction,” in progress

    

3. Auction Theory III: Heterogeneous Items and the Substitutes Condition

   * Ausubel, L. (2003), “Auction Theory for the New Economy” (short survey aimed toward grad students), Sections 6-7

      Krishna, V., Auction Theory, pp. 76-80

   * Ausubel, L. and P. Milgrom (2002), “Ascending Auctions with Package Bidding,” Frontiers of Theoretical Economics, Vol. 1: No. 1, Article 1

   * Gul, F. and E. Stacchetti (2000), “The English Auction with Differentiated Commodities,” Journal of Economic Theory, 92(1): 66-95

   * Ausubel, L. (2006), “An Efficient Dynamic Auction for Heterogeneous Commodities,” American Economic Review, 96(3): 602-629

      Ausubel, L. (2005), “Walrasian Tatonnement for Discrete Goods,” mimeo, July

   * Sun, N. and Z. Yang (2008), “A Double-Track Auction for Substitutes and Complements,” working paper

    

4. Design of Proxy Bidders for Multi-Unit Auctions

      Ausubel, L. and P. Milgrom (2006), “Ascending Proxy Auctions,” book chapter

      Ausubel, L., P. Cramton and P. Milgrom (2006), “The Clock-Proxy Auction: A Practical Combinatorial Auction Design,” book chapter

   * Milgrom P. (2008), “Assignment Messages and Exchanges,” mimeo

    

5. Common-Value Auctions with Liquidity-Constrained Bidders

   * Ausubel, L. and P. Cramton (2008), “A Troubled Asset Reverse Auction,” working paper, October

      Ausubel, L. and P. Cramton (2008), “Addendum -- Auctions for Injecting Bank Capital,” working paper, October

      Ausubel, L. and P. Cramton (2008), “Auction Design Critical for Rescue Plan,”  Economists' Voice, Vol. 5, Issue 5, Article 5, September

   * Ausubel, L., P. Cramton, E. Filiz-Ozbay, N. Higgins, E. Ozbay and A. Stocking (2009), “Common-Value Auctions with Liquidity Needs: An Experimental Test of a Troubled Assets Reverse Auction,” working paper, May

      Klemperer, P. (2008), “A New Auction for Substitutes: Central Bank Liquidity Auctions, the U.S. TARP, and Variable Product-Mix Auctions,” mimeo

    

6. Matching Theory I: The Marriage Model

   * Roth, A. and M. Sotomayor, Two-Sided Matching: A Study in Game-Theoretic Modeling and Analysis, Chapters 2-4

      Gale, D. and L. Shapley (1962), “College Admissions and the Stability of Marriage,” American Mathematical Monthly, 69: 9-15

    

7. Matching Theory II: Many-to-One Matching

   * Roth, A. and M. Sotomayor, Two-Sided Matching: A Study in Game-Theoretic Modeling and Analysis, Chapters 5-6

      Shapley, L. and M. Shubik (1972), “The Assignment Game I: The Core,” International Journal of Game Theory, 1, 111-130

   * Abdulkadiroglu, A. and T. Sonmez (2003), “School Choice: A Mechanism Design Approach,” American Economic Review, 93: 729-747

      Morrill, T. (2008), “The Roommates Problem,” working paper

      Roth, A. and X. Xing (1994), “Jumping the Gun: Imperfections and Institutions Related to the Timing of Market Transactions,” American Economic Review, 84: 992-1044

      Roth, A. and E. Peranson (1999), “The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design,” American Economic Review, 89: 748-780

      Roth, A. (2002), “The Economist as Engineer: Game Theory, Experimental Economics and Computation as Tools of Design Economics,” Econometrica, 70: 1341-1378

    

8. Matching Theory III: Money as a Continuous Variable

   * Roth, A. and M. Sotomayor, Two-Sided Matching: A Study in Game-Theoretic Modeling and Analysis, Chapters 7-9

   * Kelso, A. and V. Crawford (1982), “Job Matching, Coalition Formation, and Gross Substitutes,” Econometrica, 50: 1483-1504

    

9. Links Between Auction Theory and Matching Theory

      Ausubel, L. and P. Milgrom (2006), “Ascending Proxy Auctions,” book chapter

   * Hatfield, J. and P. Milgrom (2004), “Auctions, Matching and the Law of Aggregate Demand,” Stanford University, working paper

   * Ostrovsky, M. (2008), “Stability in Supply Chain Networks,”  American Economic Review, 98(3): 897-923

[And more to be added ...]