How can markets be designed in an efficient way? How should feedback be provided on crowdsourcing platforms so as to achieve the best possible results? In what way can lotteries contribute to equal opportunities and a greater efficiency in the allocation of school places? These are just a few of the question discussed by around 30 international researchers and industry practitioners at a workshop on market design held by ZEW in Mannheim on 28 and 29 May 2018. The event also marked the launch of the Leibniz project “Market Design for the Public Sector” conducted by the WZB Berlin Social Science Center and ZEW.

The Market Design Workshop at ZEW showed the great diversity of the topic area
Around 30 international researchers and industry practitioners participated in the workshop on market design at ZEW.

Structured procedures are playing an increasingly important role in the allocation of nursery and high school places as well as apprenticeship training positions. They can help to increase equal opportunities in the allocation process by taking into consideration the preferences of children and parents in a fair and transparent way, while allowing parents to list their preferences truthfully without having to make strategic considerations. Despite the fact that these procedures are robust to strategic behaviour, empirical findings have, however, shown that those participating in these allocation procedures frequently try to outsmart the system to their own detriment. In her speech, Professor Bettina Klaus from the University of Lausanne explained how the use of lotteries can reduce such deviations. Well-designed lotteries can increase the participants’ incentives to truthfully list their preferred schools. In his presentation, Dr. Peter Katuscak from the RWTH Aachen demonstrated how the allocation mechanism and the query should be designed in practice in order to minimise the number of false preferences given by participants.

From the allocation of nursery school places to crowdsourcing

Crowdsourcing platforms, on which creative solutions such as designs can be sourced, have been growing at a considerable pace in the past few years. Since those platforms offer highly individualised solutions, the possibility of providing feedback plays a decisive role for the success of the respective platforms. Professor Damian Beil from the University of Michigan investigated how the extent of the feedback given affects the quality of the designs. According to Professor Beil, feedback, which allows for a closer coordination with customers, can at the same time also impede potential competitors from entering the market. Talks from renowned researchers from the field of market design were supplemented with contributions from members of industry. This combination of high-quality scientific research and industry expertise illustrates one of ZEW's strengths in its still rather new research field of market design.

Market design at ZEW

Two years ago, the new Research Group “Market Design” commenced its work at the ZEW. The group’s focus lies on the analysis and optimisation of markets. Its aim is to improve the performance of existing markets by actively shaping market rules. To this end, it examines the peculiarities of each market and identifies their prevailing modes of action.