A much-deserved Nobel prize today for Lloyd Shapley and Alvin Roth for their theoretical and practical work on designing markets. In particular, matching markets where you don’t have prices to help you.
The Royal Swedish Academy of Science released a very readable account of their contributions here. Here’s the introduction:
This year’s Prize to Lloyd Shapley and Alvin Roth extends from abstract theory developed in the 1960s, over empirical work in the 1980s, to ongoing efforts to find practical solutions to real-world problems. Examples include the assignment of new doctors to hospitals, students to schools, and human organs for transplant to recipients. Lloyd Shapley made the early theoretical contributions, which were unexpectedly adopted two decades later when Alvin Roth investigated the market for U.S. doctors. His findings generated further analytical developments, as well as practical design of market institutions.
Traditional economic analysis studies markets where prices adjust so that supply…
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