Market architectures, institutional landscapes and testbed experiments

Abstract

Designer markets are becoming a reality. A merger of theory and experimental work is setting stages for a different kind of economics. The modern theory of mechanisms suggests that it is possible to design markets and/or decentralized mechanisms that can perform tasks that were thought to be impossible. The mechanisms themselves can become active participants with computers solving complex optimization or coordination problems based on "messages" submitted to the system by decentralized agents. Competition becomes utilized in new ways in the context of what are becoming known as "smart markets." Testbed experiments are demonstrating that such processes can be developed beyond purely theoretical discussions. Paper processes, mechanisms found only as ideas on the pages of a journal, are being transformed to operating processes with a physical presence that can be studied and modified by practical considerations. Policy research has expanded to incorporate the ideas; and traces of such modern theorizing can be found in institutions that are being put into place. The five papers contained in this issue represent different stages of the new approach to economic research.