Monday 1 July 2019

Markets and Match Making



Alvin Roth (2015), Who Gets What and Why, William Collins, London, pp. 260

For anyone who is interested in the implications of market failure, this book opens a new road. In a breezily delightful work, Nobel Laureate Alvin Roth, illustrates the challenging field of market design and match making that comes into play when ordinary markets fail to trade certain goods and services. The main highlight of the book is how Roth accomplishes to convey a complex economic problem in an engaging manner by taking a conversational tone that makes reading this work a joy ride!

To begin with, markets fail to capture information of demand and supply through prices when it ventures to trade in certain types of goods and services. In such cases, non-market values crowd out market principles. Take the example of trading in organs like kidney or school admissions in public education system. The act of buying and selling these ‘commodities’ lead to undesirable outcomes for the society because of value preference that makes such trade repugnant or inefficient. Then, the efficient way to allocate resources becomes the task of a very different type of exchange- that of match making.

Match making markets are different from regular commodities markets not just in their provenance. Match making markets have interested parties on the demand and supply side who wish to be allocated with efficient outcomes without the help of price signals. To accomplish this, both sides provide an ordered list of their preference and a central agency allocates optimum matches.

Match making and market design has been successfully used to solve optimization problems in organ transplantation, school allocation, employment offers and much more. This book lucidly illustrates the illuminating problems on which Roth worked on.

This is an introductory work that is meant to get students and lay readers get hooked to the idea of designing markets. Like always, more math in store for those who want to progress further. What is a bit of game theory when you get to solve interesting puzzles like these? I say, go for it!


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