Market Design Workshop Gathers Top International Economists at ZEW

How shall we allocate resources without using money, such as public school places, or kidneys available for transplantation? On 12 and 13 October 2018, around 30 international researchers attended the 15th Matching in Practice workshop at ZEW in Mannheim to discuss theoretical and applied approaches to make markets without money fairer and more efficient.

In many cities, students are assigned to public schools based on their neighbourhood. This procedure guarantees students to attend a school that is close to their home, but fosters ethnic segregation: some schools end up with very few students from ethnic minorities, whereas others receive a large fraction of them. So how can we reduce segregation in public schools, while at the same time assign students to schools that are not too far away from their home? Dr. Sandor Sovago from the University of Groningen, Netherlands, presented a study in which he quantified the degree of segregation of school districts in Amsterdam. Based on his study, Dr. Sovago was able to identify the main causes of segregation and proposed policies that could be adopted to generate a more ethnically mixed composition of school classes in order to foster the integration of ethnic minorities.

From the allocation of students to the allocation of kidneys

Using the geographical location of students’ houses as an allocation criteria, parents could be tempted to register their children as living at their grandparents’ house, or parents could even decide to move close to a preferred school to guarantee that their kids get the best possible education. In a round table discussion, Professor John Kennes from Aarhus University, Denmark, and Professor Peter Biro from the Hungarian Academy of Sciences addressed alternative, more transparent allocation methods that do not incentivize parents to act strategically, and gave a brief overview of mechanisms used for assigning students to schools in Europe. The round table was completed by ZEW economist Dr. Thilo Klein, who currently studies school choices in Mannheim in cooperation with the state of Baden-Wuerttemberg, and Professor Dorothea Kübler from the Technical University of Berlin, who chaired the discussion. After that, Dr. Julien Combe from the University College London, UK, presented a brief overview of the use of desensitization in kidney transplantation in Europe. Desensitization is a medical technique that allows to overcome blood and tissue-type incompatibilities between donors and receivers of kidneys, and thus facilitates transplants between people who would be otherwise incompatible. Dr. Combe also presented computer simulations to analyze the degree to which desensitization could affect the total number of current organ exchanges.

Fair and efficient markets

The workshop concluded with a keynote lecture by ProfessorNikhil Agarwal from the Massachusetts Institute of Technology, USA. Professor Agarwal, who has also studied kidney exchange procedures, uses his studies to describe how economists can use data from existing allocations to improve markets by making them fairer and more efficient. Being one of the most distinguished scholars of market design, Professor Agarwal gave an insightful overview of the current developments in the field. Overall, the workshop included 14 talks by leading national and international scientists.

Market design at ZEW

The ZEW Research Group “Market Design” studies how markets (with and without money) work, and aims to improve the performance of existing markets by actively shaping market rules. The group has participated in several applied research projects in cooperation with the state of Baden-Wuerttemberg and the University of Mannheim. Researchers in this group have also published theoretical papers in international journals such as the RAND Journal of Economics, Management Science, or the Journal of Mathematical Economics.