Market Design Center

Markets match individuals to scarce resources or to each other.  Online platforms are modern marketplaces, with users who interact to accomplish their own personal goals. We must therefore take care when designing the rules and infrastructure that govern online platforms in order to guide participants to beneficial outcomes.  In the process, we circumvent a wide range of market failures.

The academic literature uses economic theory to build a market design playbook.  This playbook recommends rules that induce good incentives for participants, build market thickness, and keep congestion low.  Following this playbook, economists and their peers have improved a wide array of public markets, including spectrum allocation, centralized labor markets, organ transplantation, school choice systems, affordable housing programs, and more.

Our group helps apply the market design playbook to practical markets at Microsoft.  By understanding user preferences and modeling their behavior, we can design a platform’s rules so that the designer’s goal is reached even when customers act strategically. Sometimes this means making it impossible to benefit from gaming the system. Sometimes this means embracing strategic behavior to learn about customer preferences. Using a combination of game theory, algorithm design, and microeconomic analysis, we design markets and platforms that are stable in the face of manipulation and improve economic outcomes for everyone involved.

If you are interested in building a market for one of Microsoft’s many platforms, or optimizing an existing one, please get in touch by emailing one of the people below.