MGTECON 615 - Topics in Market Design
Spring 2008
Prof. Michael Ostrovsky

1. Prediction markets

Background reading: Justin Wolfers and Eric Zitzewitz (2004), "Prediction Markets", Journal of Economic Perspectives.

Theoretical foundations

Robert Aumann  (1976), "Agreeing to Disagree", Annals of Statistics.

John Geanakoplos and Heraklis Polemarchakis (1982), "We Can't Disagree Forever", JET.

Lars Tyge Nielsen et al. (1990), "Common Knowledge of an Aggregate of Expectations", Econometrica.

Paul Milgrom and Nancy Stokey (1982), "Information, Trade and Common Knowledge", JET.

Albert Kyle (1985), "Continuous Auctions and Insider Trading", Econometrica.

F. Douglas Foster and S. Viswanathan (1996), "Strategic Trading When Agents Forecast the Forecasts of Others", Journal of Finance.

Kerry Back, C. Henry Cao, and Gregory A. Willard (2000), "Imperfect Competition among Informed Traders", Journal of Finance.

Charles Manski (2006), "Interpreting the Predictions of Prediction Markets", Economics Letters.

Justin Wolfers and Eric Zitzewitz (2007), "Interpreting Prediction Market Prices as Probabilities", working paper.

Philip J. Reny and Motty Perry (2006), "Toward a Strategic Foundation for Rational Expectations Equilibrium", Econometrica.

Empirical Evidence and Design Proposals

Continuous double auctions

Kay-Yut Chen and Charles Plott (2002), "Information Aggregation Mechanisms: Concepts, Design, and Implementation for a Sales Forecasting Problem", working paper.

Bo Cowgill, Justin Wolfers, and Eric Zitzewitz (2008), "Using Prediction Markets to Track Information Flows: Evidence from Google", working paper.

Parimutuel betting markets

Charles Plott, Jorgen Wit, and Winston Yang (2003), "Parimutuel Betting Markets as Information Aggregation Devices: Experimental Results," Economic Theory.

David Pennock (2004), "A Dynamic pari-mutuel market for hedging, wagering, and information aggregation", ACM EC'04.

Market scoring rules

Robin Hanson (2003), "Combinatorial Information Market Design", Information Systems Frontiers.

Y. Chen, D. Reeves, D. Pennock, R. Hanson, L. Fortnow, and R. Gonen (2007), "Bluffing and Strategic Reticence in Prediction Markets", version 1, version 2.

Stanko Dimitrov and Rahul Sami (2007), "Non-myopic Strategies in Prediction Markets", working paper.

2. Voting mechanisms

Background reading 1: Section 2 ("Institutional Background") of Gregor Matvos and Michael Ostrovsky (2006), "Strategic Proxy Voting", working paper.

Background reading 2: Michel Balinski and Rida Laraki (2007), "A theory of measuring, electing, and ranking", PNAS.

Theoretical literature on strategic voting

David Austen-Smith and Jeffrey S. Banks (1996), "Information Aggregation, Rationality, and the Condorcet Jury Theorem", American Political Science Review.

Timothy J. Feddersen and Wolfgang Pesendorfer (1996), "The Swing Voter's Curse", AER.

Mark Fey and Jaehoon Kim (2002), "The Swing Voter's Curse: Comment", AER.

Timothy J. Feddersen and Wolfgang Pesendorfer (1997), "Voting Behavior and Information Aggregation in Elections with Private Information", Econometrica.

Timothy J. Feddersen and Wolfgang Pesendorfer (1998), "Convicting the Innocent: The Inferiority of Unanimous Jury Verdicts under Strategic Voting", APSR.

Eddie Dekel and Michele Piccione (2000), "Sequential Voting Procedures in Symmetric Binary Elections", JPE.

Hao Li (2001), "A Theory of Conservatism", JPE.

Ernst Maug and Bilge Yilmaz (2002), "Two-Class Voting: A Mechanism for Conflict Resolution", AER.

Nicola Persico (2004), “Committee Design with Endogenous Information”, Review of Economic Studies.

Dino Gerardi and Leeat Yariv (2007), "Deliberative Voting", JET.

Alex Gershkov and Balazs Szentes (forthcoming), "Optimal Voting Schemes with Costly Information Acquisition", JET.

John Morgan and Phillip Stocken (forthcoming), "Information Aggregation in Polls", AER.

Vijay Krishna and John Morgan (2008), "On the Benefits of Costly Voting", working paper.

3. Information in auctions

Background reading 1: Tim Loughran and Jay Ritter (2004), "Why Has IPO Underpricing Changed Over Time?", Financial Management.

Background reading 2: Joe Nocera (2006), "Open and Fair: Why Wall St. Hates Auctions", New York Times.

Background reading 3: Ravi Jagannathan and Ann E. Sherman (2007), "Why Have IPO Auctions Failed the Market Test?", working paper.

Background reading 4: TechCrunch (2008), "Rackspace Files IPO, Will Set Price Via Auction", auction details at

Costly information acquisition

Paul R. Milgrom (1981), "Rational Expectations, Information Acquisition, and Competitive Bidding", Econometrica.

Nicola Persico (2000), "Information acquisition in auctions", Econometrica.

Dirk Bergemann and Juuso Valimaki (2002), "Information acquisition and efficient mechanism design", Econometrica.

Matthew O. Jackson (2003), "Efficiency and information aggregation in auctions with costly information", Review of Economic Design.

Olivier Compte and Philippe Jehiel (2007), "Auctions and information acquisition: sealed bid or dynamic formats?", RAND Journal of Economics.

Dirk Bergemann, Xianwen Shi, and Juuso Valimaki (2008), "Information acquisition in interdependent value auctions", working paper.

4. Combinatorial auctions (guest lecture by Paul Milgrom on May 19)

Paul Milgrom and Bob Day (2007), "Core-Selecting Auctions", International Journal of Game Theory.

Lawrence Ausubel, Peter Cramton, and Paul Milgrom (2006), "The Clock-Proxy Auction: A Practical Combinatorial Design", in Combinatorial Auctions.

Ofcom Rules Notice (2008).

5. Sponsored search auctions (May 30, 1:45-4:45pm, M105)

Herman B. Leonard (1983), "Elicitation of Honest Preferences for the Assignment of Individuals to Positions", JPE.

Gabrielle Demange, David Gale, and Marilda Sotomayor (1986), "Multi-Item Auctions", JPE.

Benjamin Edelman and Michael Ostrovsky (2007), "Strategic Bidder Behavior in Sponsored Search Auctions", Decision Support Systems.

Benjamin Edelman, Michael Ostrovsky, and Michael Schwarz (2007), "Internet Advertising and the Generalized Second Price Auction: Selling Billions of Dollars Worth of Keywords", AER.

Hal R. Varian (2007), "Position Auctions", IJIO.

Levent Ulku (2008), "Combinatorial Mechanism Design", working paper.

Benjamin Edelman and Michael Schwarz (2006), "Optimal Auction Design in a Multi-unit Environment: The Case of Sponsored Search Auctions", working paper.

Tim Roughgarden and Mukund Sundararajan (2007), "Is Efficiency Expensive?", Third Workshop on Sponsored Search Auctions, WWW2007.

Susan Athey and Glenn Ellison (2008), "Position Auctions with Consumer Search", working paper.

6. Topics in matching: Information, uncertainty, dynamics, supply chains (May 30 and June 2)

Michael Ostrovsky (2008, forthcoming), "Stability in Supply Chain Networks", AER.

Hao Li and Sherwin Rosen (1998), "Unraveling in Matching Markets", AER.

Hao Li and Wing Suen (2000), "Risk-sharing, Sorting, and Early Contracting", JPE.

Wing Suen (2000), "A Competitive Theory of Equilibrium and Disequilibrium Unraveling in Two-Sided Matching", RAND Journal of Economics.

Hao Li and Wing Suen (2004), "Self-fulfilling Early Contracting Rush", International Economic Review.

Ettore Damiano, Hao Li, and Wing Suen (2005), "Unraveling of Dynamic Sorting", Review of Economic Studies.

Michael Ostrovsky and Michael Schwarz (2008), "Information Disclosure and Unraveling in Matching Markets", working paper.

Muriel Niederle and Leeat Yariv, (2008), "Matching through Decentralized Markets", working paper (not available online).

Archishman Chakraborty, Alessandro Citanna, and Michael Ostrovsky (2007), "Two-Sided Matching with Interdependent Values", working paper.

Atila Abdulkadiroglu and Simon Loertscher (2007), "Dynamic House Allocation", working paper.

Utku Unver (2007), "Dynamic Kidney Exchange", working paper.