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Syllabus for Economics 704

Spring 2017

 

Official Matters

Economics 704 is the second half of the Economics Departments two-semester sequence in Advanced Microeconomics. (Economics 703, the first half of the sequence, is taught by Professor Peter Cramton or a substitute in the fall semester.) 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. As such, in Spring 2017, 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.

Every year, one or two topics which are timely and appear to be particularly fertile areas for research are selected for special emphasis. In 2017, four topics are under consideration for special emphasis: (1) the incorporation of classical revealed preference considerations into the design of practical auction and matching markets -- some short thoughts on the topic can be found in Section 2B of this manuscript; (2) a recap of the Federal Communication Commissions “Incentive Auction,” a two-sided auction in which television broadcast spectrum is being repurposed for wireless broadband; (3) the use of “obvious strategy-proofness” as a criterion in market design; and (4) applying insights of the sequential bargaining literature to matching markets.

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

http://www.ausubel.com/econ704

Some of the course materials 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 March 7; 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 0101.


Office Hours

Tuesdays/Thursdays 11:30 am - 12:30 pm, Tydings 4130C.


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

(* = paper will receive particular emphasis in class)

  1. Introduction

    * Abdulkadiroglu, A. and L. Ausubel (2014), “Market Design” (current draft of survey under review at the Journal of Economic Literature)

     

  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

    * 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

     

  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., 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

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

     

  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

    * 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

    * 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

     

  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 (2010), “Core-Selecting Auctions with Incomplete Information,” working paper, University of Maryland

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

       Cramton, P. (2009), “Spectrum Auction Design,” working paper, University of Maryland

       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, forthcoming

       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. (2011), “Endogenous Budget Constraints in Auctions,” working paper, University of Maryland, November

     

  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

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

     

  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

    * 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,” 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 ...]

 



2017 Lawrence M. Ausubel