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Preview: Oxford Review of Economic Policy - current issue

Oxford Review of Economic Policy Current Issue





Published: Thu, 02 Nov 2017 00:00:00 GMT

Last Build Date: Thu, 02 Nov 2017 13:46:56 GMT

 



Table of Contents

2017-11-02




An invitation to market design

2017-11-02

Abstract
Market design seeks to translate economic theory and analysis into practical solutions to real-world problems. By redesigning both the rules that guide market transactions and the infrastructure that enables those transactions to take place, market designers can address a broad range of market failures. In this paper, we illustrate the process and power of market design through three examples: the design of medical residency matching programmes; a scrip system to allocate food donations to food banks; and the recent ‘Incentive Auction’ that reallocated wireless spectrum from television broadcasters to telecoms. Our lead examples show how effective market design can encourage participation, reduce gaming, and aggregate information, in order to improve liquidity, efficiency, and equity in markets. We also discuss a number of fruitful applications of market design in other areas of economic and public policy.



The design of environmental markets: What have we learned from experience with cap and trade?

2017-11-02

Abstract
This article reviews the design of environmental markets for pollution control over the past 30 years, and identifies key market-design lessons for future applications. The focus is on a subset of the cap-and-trade systems that have been implemented, planned, or proposed around the world. Three criteria led us to the selection of systems for review. First, among the broader class of tradable permit systems, our focus is exclusively on cap-and-trade mechanisms, thereby excluding emission-reduction-credit or offset programmes. Second, among cap-and-trade mechanisms, we examine only those that target pollution abatement, and so we do not include applications to natural resource management, such as individual transferable quota systems used to regulate fisheries. Third, we focus on the most prominent applications—those that are particularly important environmentally, economically, or both.



Electricity market design

2017-11-02

Abstract
Electricity markets are designed to provide reliable electricity at least cost to consumers. This paper describes how the best designs satisfy the twin goals of short-run efficiency—making the best use of existing resources—and long-run efficiency—promoting efficient investment in new resources. The core elements are a day-ahead market for optimal scheduling of resources and a real-time market for security-constrained economic dispatch. Resources directly offer to produce per their underlying economics and then the system operator centrally optimizes all resources to maximize social welfare. Locational marginal prices, reflecting the marginal value of energy at each time and location, are used in settlement. This spot market provides the basis for forward contracting, which enables participants to manage risk and improves bidding incentives in the spot market. There are important differences in electricity markets around the world, reflecting different economic and political settings. Electricity markets are undergoing a transformation as the resource mix transitions from fossil fuels to renewables. The main renewables, wind and solar, are intermittent, have zero marginal cost, and lack inertia. These challenges can be met with battery storage and improved demand response. However, good governance is needed to assure the market rules adapt to meet new challenges.



Broadening the market design approach to school choice

2017-11-02

Abstract
School choice refers to policies that allow parents’ preferences to be an input to the decision of which school a student will attend. A rich body of research has developed over the past 10–15 years to study mechanisms that implement school choice. This literature has mostly taken the inputs of school choice—preferences, priorities, and capacities—as exogenous. More recently, researchers have sought to embed the school choice problem into its wider context, thereby broadening the scope of market design questions and enriching the analysis. This article discusses current school choice policy issues in light of this recent literature and outlines remaining open questions.



The market design and policy of online review platforms

2017-11-02

Abstract
I present the institutions and incentives of online reviews, including attracting initial reviews, assuring truthful reviews of genuine experiences, and avoiding inflated or deceptive reviews. I also explore the competition and consumer protection concerns associated with reviews.



Toward a fully continuous exchange

2017-11-02

Abstract
We propose a new market design for a securities exchange that matches ‘continuous scaled limit orders’. This new order type differs from standard limit orders in two ways. First, orders to buy and sell represent flows of shares over time rather than stocks of shares available for immediate purchase or sale. Second, orders are expressed as continuous piecewise linear functions relating price to quantity rather than step functions defined on a discrete grid of prices and quantities. Continuous scaled limit orders implement Fischer Black’s vision of traders limiting temporary price impact by trading gradually over time. They dramatically lessen the rents high-frequency traders earn from the current market design. The proposal is compatible with frequent batch auctions and random time delays.



Market design for living-donor organ exchanges: an economic policy perspective

2017-11-02

Abstract
Within the last decade, the use of living-donor kidney exchanges for transplants has emerged as a cross-disciplinary success for medical doctors and ethicists, market design economists, and computer scientists. This paper describes the fronts on which these efforts have been successful and what needs to be done further to increase their impact. This paradigm is also partially being applied to liver exchanges. There are other organs for which living donation is possible and gains from exchange can be much bigger than for kidneys. Recent academic work on single-graft liver and dual-donor organ exchanges for lobar lung, dual-graft liver, and simultaneous liver–kidney transplantation are also discussed.



Ethics and market design

2017-11-02

Abstract
This paper examines the relationship between ethics and market design. It argues that market design should not rely wholly on preference utilitarianism in order to make ethical judgements. It exposits an alternative normative framework—informed neutrality between reasonable ethical positions.