Market design for new leaders

Menezes, Flavio M. (2013). Market design for new leaders. Risk and Sustainable Management Group Working Paper Series: Australian Public Policy P13_4, School of Economics, The University of Queensland.

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Author Menezes, Flavio M.
Title Market design for new leaders
School, Department or Centre School of Economics
Institution The University of Queensland
Open Access Status Other
Series Risk and Sustainable Management Group Working Paper Series: Australian Public Policy
Report Number P13_4
Publication date 2013
Start page 1
End page 17
Language eng
Abstract/Summary In this article we explore some of the theoretical developments over the last 40 years which led to the emergence of the field of market design. This new field has had a substantive impact on policy, especially after the highly successful auctions of the mobile telephony licences in the mid-1990s in the US. The auctions replaced an inefficient allocation system where licences were allocated to applicants via a lottery and subsequently sold for large windfalls. These auctions raised substantial amount of revenue for the US government and were adopted worldwide, including in Australia. First, I provide a brief history of market design in cases where monetary payments can be used as the basis to allocate goods and services. This history starts with the game theoretical foundations of non-cooperative behaviour – as typically the interests of different individuals are in conflict, for example, when buying or selling goods and services – and then moves on to mechanism design and auction theory and practice. Second, I will review a very large experiment in Brazil where markets were created to avoid electricity rationing in 2001. The choice of this example is not inconsequential. It is meant to illustrate that such an approach to public policy can be successful even in developing countries with weaker institutions. I will then provide some concluding comments.
Institutional Status UQ

Document type: Working Paper
Collection: School of Economics Publications
 
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Created: Thu, 26 Jun 2014, 09:52:21 EST by Professor Flavio Menezes on behalf of School of Economics