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Traditional economic theory studies idealized markets in which prices alone can guide efficient allocation, with no need for central organization. Such models build from Adam Smith’s famous concept of an invisible hand, which guides markets and renders regulation or interference largely unnecessary. Yet for many markets, prices alone are not enough to guide feasible and efficient outcomes, and regulation alone is not enough, either. Consider air traffic control at major airports. While prices could encourage airlines to take off and land at less congested times, prices alone do just part of the job; an air traffic control system is still indispensable to avoid disastrous consequences. With just an air traffic controller, however, limited resources can be wasted or poorly used. What’s needed in this and many other real-world cases is an auction system that can effectively reveal prices while still maintaining enough direct control to ensure that complex constraints are satisfied. In Discovering Prices, Paul Milgrom—the world’s most frequently cited academic expert on auction design—describes how auctions can be used to discover prices and guide efficient resource allocations, even when resources are diverse, constraints are critical, and market-clearing prices may not even exist. Economists have long understood that externalities and market power both necessitate market organization. In this book, Milgrom introduces complex constraints as another reason for market design. Both lively and technical, Milgrom roots his new theories in real-world examples (including the ambitious U.S. incentive auction of radio frequencies, whose design he led) and provides economists with crucial new tools for dealing with the world’s growing complex resource-allocation problems.
This book is the first that describes the practices of any stock exchange; it makes evident a high development of practices, with puts, calls, pools, and manipulations; and it appeared as early as the seventeenth century. Not inappropriately the stock exchange described is that of Amsterdam, a city which at the date of the volume’s publication —1688 — was still the leading financial center of the world. The book, to be sure, is hardly a systematic account of the institution; the author pursued moral, philosophical, and rhetorical objectives, and, while saying a lot that seems now to be of little value, manages somehow to leave unsaid a great deal that would be of interest for us. Nevertheless, it represents, even in its peculiar form, a really important source of information about the stock exchange, and indeed about the Dutch business world of that period.
This open access book addresses four standard business school subjects: microeconomics, macroeconomics, finance and information systems as they relate to trading, liquidity, and market structure. It provides a detailed examination of the impact of trading costs and other impediments of trading that the authors call rictions It also presents an interactive simulation model of equity market trading, TraderEx, that enables students to implement trading decisions in different market scenarios and structures. Addressing these topics shines a bright light on how a real-world financial market operates, and the simulation provides students with an experiential learning opportunity that is informative and fun. Each of the chapters is designed so that it can be used as a stand-alone module in an existing economics, finance, or information science course. Instructor resources such as discussion questions, Powerpoint slides and TraderEx exercises are available online.
Among the many changes brought by the Internet is the emergence of electronic commerce over the Web. E-commerce activities, such as the online exchange of information, services, and products, are opening up completely new opportunities for business, at new levels of productivity and profitability. In parallel with the emergence of e-commerce, intelligent software agents as entities capable of independent action in open, unpredictable environments have matured into a promising new technology. Quite naturally, e-commerce agents hold great promise for exploiting the Internet's full potential as an electronic marketplace. The 20 coherently written chapters in this book by leading researchers and professionals present the state of the art in agent-mediated e-commerce. Researchers, professionals, and advanced students interested in e-commerce or agent technology will find this book an indispensable source of information and reference.
This book focuses on markets organized as double auctions in which both buyers and sellers can submit bids and asks for standardized units of well-defined commodities and securities. It examines evidence from the laboratory and computer simulations.
A taxonomy of existing and planned automated trade execution systems in financial markets is provided. Over 50 automated market structures in 16 countries are analyzed. The classification scheme is organized around the principle that such markets consist of an algorithm that performs a trade matching function, together with information display and transmission mechanisms. Automated market structures are classified by ordered sets of trade execution priority rules, trade matching protocols and associated degree of automation of price discovery, and transparency, to include informational asymmetries between classes of market participants. Systematic differences in systems across types of financial instruments, geographical market centers, and over time are analyzed.
The interactions that occur in securities markets are among the fastest, most information intensive, and most highly strategic of all economic phenomena. This book is about the institutions that have evolved to handle our trading needs, the economic forces that guide our strategies, and statistical methods of using and interpreting the vast amount of information that these markets produce. The book includes numerous exercises.
This book provides a comprehensive introduction to modern auction theory and its important new applications. It is written by a leading economic theorist whose suggestions guided the creation of the new spectrum auction designs. Aimed at graduate students and professionals in economics, the book gives the most up-to-date treatments of both traditional theories of 'optimal auctions' and newer theories of multi-unit auctions and package auctions, and shows by example how these theories are used. The analysis explores the limitations of prominent older designs, such as the Vickrey auction design, and evaluates the practical responses to those limitations. It explores the tension between the traditional theory of auctions with a fixed set of bidders, in which the seller seeks to squeeze as much revenue as possible from the fixed set, and the theory of auctions with endogenous entry, in which bidder profits must be respected to encourage participation.
Markets in Profile explores the confluence of three disparate philosophical frameworks: the Market Profile, behavioral finance, and neuroeconomics in order to present a unified theory of how markets work. The Market Profile is an ever-evolving, multidimensional graphic that gives visual form to the market's continuing auction process, revealing the myriad underlying dynamics that influence market activity. Behavioral finance posits that investors are driven more by emotional factors and the subjective interpretation of minutia than by "rationality" when making investment decisions. And neuroeconomics is the study of how investor psychology permeates and affects the financial markets. Mr. Dalton explicates the ways in which irrational human behavior influences the market's natural auction process, creating frequently predictable market structure, which results in opportunities for investors to ameliorate risk. The book will improve investors ability to interpret change in markets, enabling better, more confident investment decisions.
A broad overview of market mechanisms, with an emphasis on the interplay between theory and real-life applications; examples range from eBay auctions to school choice. This book offers an introduction to market design, providing students with a broad overview of issues related to the design and analysis of market mechanisms. It defines a market as a demand and a supply, without specifying a price system or mechanism. This allows the text to analyze a broad set of situations—including such unconventional markets as college admissions and organ donation—and forces readers to pay attention to details that might otherwise be overlooked. Students often complain that microeconomics is too abstract and disconnected from reality; the study of market design shows how theory can help solve existing, real-life problems. The book focuses on the interplay between theory and applications. To keep the text as accessible as possible, special effort has been made to minimize formal description of the models while emphasizing the intuitive, with detailed explanations and resolution of examples. Appendixes offer general reviews of elements of game theory and mechanism design that are related to the themes explored in the book, presenting the basic concepts with as many explanations and illustrations as possible. The book covers topics including the basics of simple auctions; eBay auctions; Vickrey–Clarke–Groves auctions; keyword auctions, with examples from Google and Facebook; spectrum auctions; financial markets, with discussions of treasury auctions and IPOs; trading on the stock market; the basic matching model; medical match; assignment problems; probabilistic assignments; school choice; course allocation, with examples from Harvard and Wharton; and kidney exchange.