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Topics in Mechanism Design (ECO-AD-DESMECHDE)

ECO-AD-DESMECHDE

Description

This course is an advanced course introducing Topics in Mechanism Design. It will introduce students to modern techniques and applications of the theory of mechanism design.

Referee Report: 50% of the grade. This component is aimed at helping students understand how to analyze and provide productive feedback on research. Students will required to choose a working  paper related (broadly) to the topics covered in class. They will have to write down a summary, that will describe what they understand to be the main contributions of the paper. The, they have to list what they think are the strengths, weaknesses of the paper, and provide suggestions for improvement. They will be evaluated on their understanding of the paper as well as the quality of the feedback they provide, for improvement. 

Research proposal (50% of grade): Students will be required to identify a research question broadly related to the topics from the class. They will be asked to submit a research proposal (2-3 pages) that will 1) identify a novel question (this could be an extension of a model they find interesting, but has to be something that’s not exactly the same as an existing paper) 2) Provide some motivation for why this question is interesting or important, why should we care about this. 3) Write down a simple model that captures the main setting in the question, and find a preliminary result. You do not have to solve the model fully, but some preliminary result, or a solved example that deals with a special case, that makes some progress towards answering the question you have raised, is sufficient. 

WEEK 1 (Lectures 1 and half of lecture 2)
Review of Static Mechanism Design: This part systematically covers the fundamental concepts and techniques of static mechanism design, including general envelope theorems, Bauer’s maximum principle etc.
•    Selling to one agent: revenue maximizing mechanism
•    Monopolistic Screening
•    Selling to many agents: Optimal Auction design with multiple buyers, Auctions vs Negotiations

WEEK 2 (Other half of Lecture 2, Lectures 3 and 4)
•    Introduction to common auction formats, revenue vs efficiency, private values symmetric model, first price and second price auctions, revenue comparison, reserve prices. Readings: Krishna, Ch 1,2
•    Revenue Equivalence Principle, All pay Auctions, Auctions with uncertain number of bidders, Asymmetric bidders (if time permits). Readings: Krishna: Ch 3,4
•    Auctions with Interdependent values. Readings: Krishna, Ch 6
•    Auctions with multiple units

WEEK 3 

Lecture 5 Applications: Spectrum Auctions, Internet Auctions

Note: we might spend longer on applications than one lecture, depending on the interest and how much time the theory takes. We have tentatively put one lecture but it could end up being 1.5 lectures. 

Lecture 6:
Robustness: This part introduces modern non-Bayesian methods to mechanism design that are currently gaining traction in analyzing a variety of settings.
•    Robust Optimal Pricing

WEEK 4
Lecture 7 Robustness
•    Robust Monopoly Regulation
Lecture 8
Mechanism Design in Two-Sided Markets:
•    Optimal Pricing

WEEK 5 Lecture 9
Mechanism Design in Two-Sided Markets
•    Matching Design

Lecture 10 Applications
•    Data, Competition and Platforms
•    Under-Utilization


Bibliography and further readings

For the First Part (first five lectures):

•    Static Mechanism Design: An Introduction to the theory of Mechanism Design by Tilman Borgers, Ludvig Sinander’s lecture notes for selling to one agent, Bulow and Klemperer (1996), Mussa and Rosen (1978), Myerson (1981).
•    Auctions: Textbooks: Auction Theory by Vijay Krishna, Putting Auction Theory to Work by Paul Klemperer
Some other readings
•    McAfee,R.Prestonand John McMillan.1987. “Auctions and Bidding.”Journal of Economic Literature, 25, 699-738.
•    Klemperer, P., 1999. “Auction Theory: A guide to the Literature,” Journal of Economic Surveys, 13: 227-260.
•    Klemperer, P., 2000. “Why every economist should learn some auction theory.” invited paper from the Econometric Society World Congress.

Applications:
•    Varian, H. R. 2009. Online Ad Auctions. American Economic Review: Papers & Proceedings 99(2):430–434
•    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
•    Varian, H. R. 2007. Position Auctions. International Journal of Industrial Organization 25(6):1163–1178.
•    Klemperer, P.D., “What Really Matters in Auction Design”, Journal of Economic Perspectives
•    McAfee, R.P. and McMillan, J. (1994) “Selling Spectrum Rights”, Journal of Economic Perspectives.
•    Klemperer, P. (2002) “How (Not) to Run Auctions: the European 3G Telecom Auctions”, European Economic Review


For the Second Part (last five lectures):
•    Robustness: Bergemann and Schlag (2008), Bergemann and Schlag (2011), Barron and Myerson (1984), Guo and Shmaya (2025)
•    Two-Sided Markets: Gomez and Pavan (2021), Jullien, Pavan and Rysman (2022)
•    Data, Competition and Platforms: Bergemann and Bonatti (2024)
•    Under-Utilization: Corrao, Flynn and Sastry (2023)


 

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