Tuesday, November 9, 2010

How to Fix a Broken Marketplace

Harvard Business School Working Knowledge
November 8, 2010

An economic handyman of sorts, Alvin E. Roth fixes broken markets.

As a pioneer in the field of market design, the Harvard Business School professor cofounded a kidney donation matching system for New England, corrected public school choice programs in New York and Boston, and tackled the market for new medical residents, economists, and lawyers. (Last week, Forbes magazine named him one of the world's "seven most powerful new economists.")

"Market design is the engineering part of game theory," Roth explains. "It's the underlying science of how the details work and how the parts fit together. We deal with much more complicated games than the game theory usually deals with."

In short, Roth has determined that successful marketplaces require three key elements. "They must be thick, uncongested, and safe," he says.


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