Discovering Prices: Auction Design in Markets with Complex Constraints

Traditional economic theory studies idealized markets in which prices alone can guide efficient allocation, but for many markets, regulation alone is not enough. Paul Milgrom's book "Discovering Prices" 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 exist.

\n Format: Paperback / softback
\n Length: 248 pages
\n Publication date: 06 April 2021
\n Publisher: Columbia University Press
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Traditional economic theory delves into the realm of idealized markets, where prices alone hold the power to steer efficient allocation without the need for central organization. This framework is rooted in Adam Smith's renowned concept of an invisible hand, which guides markets and renders regulation or interference largely unnecessary. However, it is important to acknowledge that for many markets, relying solely on prices to achieve feasible and efficient outcomes is insufficient. Take, for instance, the realm of air traffic control at major airports. While prices can incentivize airlines to schedule their flights during less congested times, they alone cannot ensure optimal outcomes. An air traffic control system is indispensable to prevent disastrous consequences. Even with the presence of an air traffic controller, limited resources can be wasted or inefficiently utilized.

In such real-world scenarios, an auction system emerges as a crucial tool for discovering prices while maintaining sufficient direct control to satisfy complex constraints. Paul Milgrom, the preeminent academic authority on auction design, elucidates in his book Discovering Prices how auctions can be employed to unveil prices and facilitate efficient resource allocations, even in the face of diverse resources, critical constraints, and the absence of market-clearing prices. Economists have long recognized the necessity of market organization due to externalities and market power. In this groundbreaking work, Milgrom introduces complex constraints as another compelling reason for market design. The book is both engaging and technical, drawing upon real-world examples, including the ambitious U.S. incentive auction of radio frequencies, where Milgrom played a pivotal role in its design. By integrating complex constraints into the analysis, Milgrom provides economists with invaluable tools for addressing the increasingly intricate resource-allocation challenges faced by the world today.

\n Weight: 314g\n
Dimension: 139 x 217 x 19 (mm)\n
ISBN-13: 9780231175999\n \n