Official Matters

Economics 704 is the second part of the Economics Department’s two-semester sequence in Advanced Microeconomics. (Economics 703, the other part of the sequence, is taught by Professor Dan Vincent in the fall semester. The courses can be taken in either order) It is intended primarily for second-year Ph.D. students in Economics, the Business School, AREC, Computer Science and other related departments; and it regularly leads students into dissertation research. The course material varies from year to year, but in recent years, it has concentrated on the growing field of market design, which received special recognition with the awarding of the 2012 Nobel Prize to Al Roth and Lloyd Shapley and the 2020 Nobel Prize to Paul Milgrom and Bob Wilson. As such, in Spring 2024, 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.

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

https://www.ausubel.com/econ704

UMD’s policies on graduate courses and graduate student rights and responsibilities can be found here:

https://gradschool.umd.edu/faculty-and-staff/course-related-policies

Some of the course readings and materials will reside on ELMS. 

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).

But mostly the original journal articles

    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, Lefrak 1201. [However, the first class (Jan. 25) will be held remotely on Zoom.]

Office Hours

Thursdays 3:30 pm - 4:30 pm or by appointment, Tydings 4130C.

Preliminary Syllabus (approximately two weeks per topic, except for "Introduction")

(* = paper will receive particular emphasis in class)

1. Introduction

     

2. 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

3. 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. and P. Milgrom (2006), “The Lovely but Lonely Vickrey Auction,” Chapter 1 in P. Cramton, Y. Shoham, and R. Steinberg (eds.), Combinatorial Auctions, MIT Press

   * 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

      Ostrovsky, M. and A. Skrzypacz (2022), “Pure-Strategy Equilibrium in the Generalized First-Price Auction,” working paper, Stanford University

   * Ausubel, L., P. Cramton, M. Rostek, M. Pycia and M. Weretka (2014), “Demand Reduction and Inefficiency in Multi-Unit Auctions,” Review of Economic Studies, 81(4): 1366-1400

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

4. 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 (2009), “A Double-Track Adjustment Process for Discrete Markets With Substitutes and Complements,” Econometrica, 77(3): 933–952

   * Ausubel, L. and O. Baranov (2020), “Revealed Preference and Activity Rules in Dynamic Auctions”, International Economic Review, 61(2): 471–502

5. Core-Selecting Auctions and the Combinatorial Clock Auction (CCA) Design

      Ausubel, L. and P. Milgrom (2006), “Ascending Proxy Auctions,” Chapter 3 in P. Cramton, Y. Shoham, and R. Steinberg (eds.), Combinatorial Auctions, MIT Press

      Ausubel, L., P. Cramton and P. Milgrom (2006), “The Clock-Proxy Auction: A Practical Combinatorial Auction Design,” Chapter 5 in P. Cramton, Y. Shoham, and R. Steinberg (eds.), Combinatorial Auctions, MIT Press

   * Day, R. and P. Milgrom (2008), “Core-Selecting Package Auctions,” International Journal of Game Theory, 36, 393-407

      Erdil, A. and P. Klemperer (2010), “A New Payment Rule for Core-Selecting Package Auctions,” Journal of the European Economic Association (forthcoming)

      Goeree, J. and Y. Lien (2009), “On the Impossibility of Core-Selecting Auctions,” working paper, Caltech

      Ausubel, L. and O. Baranov (2020), “Core-Selecting Auctions with Incomplete Information”, International Journal of Game Theory, 49(1): 251–273

      Baranov, O. (2010), “Exposure vs. Free-Riding in Auctions with Incomplete Information,” working paper, University of Maryland

      Cramton, P. (2013), “Spectrum Auction Design,” Review of Industrial Organization, 42:2

      Ausubel, L. and P. Cramton (2011), “Activity Rules for the Combinatorial Clock Auction,” working paper, University of Maryland

   * Ausubel, L. and O. Baranov (2014), “Market Design and the Evolution of the Combinatorial Clock Auction,” American Economic Review Papers & Proceedings, and slides

   * Ausubel, L. and O. Baranov (2017), “A Practical Guide to the Combinatorial Clock Auction”, Economic Journal

      Milgrom P. (2009), “Assignment Messages and Exchanges,” American Economic Journal: Microeconomics, 1(2): 95–113

6. 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

   * Burkett, J. (2015), “Endogenous Budget Constraints in Auctions,” Journal of Economic Theory, 158: 1-20

7. 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

   * Morrill, T. (2010), “The Roommates Problem Revisited,” Journal of Economic Theory, 145(5): 1739-1756

8. 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

      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

9. Matching Theory III: Recent Applications—School Choice and Kidney Exchange

      Abdulkadiroglu, A. and T. Sonmez (1998), “Random Serial Dictatorship and the Core from Random Endowments in House Allocation Problems,” Econometrica, 66(3): 689-701

      Abdulkadiroglu, A. and T. Sonmez (1999), “House Allocation with Existing Tenants,” Journal of Economic Theory, 88(2): 233-260

   * Abdulkadiroglu, A. and T. Sonmez (2003), “School Choice: A Mechanism Design Approach,” American Economic Review, 93(3): 729-747

      Chen, Y. and O. Kesten (2011), “From Boston to Shanghai to Gale-Shapley: A study on a family of school choice mechanisms,” working paper

   * Che, Y-K and O. Tercieux (2018), “Top Trading Cycles in Prioritized Matching: An Irrelevance of Priorities in Large Markets,” working paper, August

   * Abdulkadiroglu, A., Y-K Che, P. Pathak, A. Roth, and O. Tercieux (2017), “Minimizing Justified Envy in School Choice: The Design of New Orleans’ OneApp,” NBER Working Paper No. 23265

   * Roth, A., T. Sonmez and U. Unver (2004), “Kidney Exchange,” Quarterly Journal of Economics, 119(2): 457-488

   * Roth, A., T. Sonmez and U. Unver (2005) “Pairwise Kidney Exchange,” Journal of Economic Theory, 125: 151-188

      Roth, A., T. Sonmez and U. Unver (2007) “Efficient Kidney Exchange: Coincidence of Wants in Markets with Compatibility-Based Preferences,” American Economic Review, 97(3): 828-851

   * Ausubel, L. and T. Morrill (2014), “Sequential Kidney Exchange,” American Economic Journal: Microeconomics, 6(3): 265-285

10. Matching Theory IV: 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

       Johnson, T. (2010), “Matching Through Position Auctions,” working paper, University of Maryland

11. Links Between Auction Theory and Matching Theory

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

    * Hatfield, J. and P. Milgrom (2005), “Matching with Contracts,” American Economic Review, 95(4): 913-935

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

12. Obviously Strategy-Proofness

    * Li, S. (2017), “Obviously Strategy-Proof Mechanisms,” American Economic Review, 107(11): 3257-3287

    * Ashlagi, I. and Y. Gonczarowski (2018), “Stable Matching Mechanisms Are Not Obviously Strategy-Proof,” Journal of Economic Theory, 177: 405-425

       Gonczarowski, Y., O. Heffetz and C. Thomas (2022), “Strategyproofness-Exposing Mechanism Descriptions,” working paper, Harvard University

[And more to be added ...]