September 06 – 08
International Conference on Operations Research

Prof. Dr. Martin Bichler (TU München), WD-25, HFB|D

Prof. Dr. Martin Bichler

Prof. Dr. Martin Bichler

Wednesday, 15.30 - 16.15, HFB|D

Market Design: A Linear Programming Approach

Market design uses economic theory, mathematical optimization, experiments, and empirical analysis to design market rules and institutions. Fundamentally, it asks how scarce resources should be allocated and how the design of the rules and regulations of a market affects the functioning and outcomes of that market. Operations Research has long dealt with resource allocation problems, but typically from the point of view of a single decision maker. In contrast, Microeconomics focused on strategic interactions of multiple decision makers. While early contributions to auction theory model single-object auctions, much recent theory in the design of multi-object auctions draws on linear and integer linear programming combined with game-theoretical solution concepts and principles from mechanism design. This led to interesting developments in theory and practical market designs.

The talk will first introduce a number of market design applications and show how discrete optimization is used for allocation and payment rules. These markets include industrial procurement, the sale of spectrum licenses, as well as cap-and-trade systems. In addition, we survey a number of theoretical developments and the role of integer and linear programming in recent models and market designs. Models of ascending multi-object auctions and approximation mechanisms will serve as examples. Finally, we will discuss limitations of existing models and research challenges. Some of these challenges arise from traditional assumptions about utility functions and social choice functions, which often do not hold in multi-object markets in the field. For example, financial constraints of bidders have long been ignored in theory, but they are almost always an issue in the field. Such deviations from standard assumptions lead to interesting theoretical questions, but also to very tangible problems in the design of markets.

Martin Bichler received his MSc degree from the Technical University of Vienna, and his Ph. D. as well as his Habilitation from the Vienna University of Economics and Business. He was working as a research fellow at UC Berkeley, and as research staff member at the IBM T. J. Watson Research Center, New York. Since 2003 he is full Professor at the Department of Informatics of the Technical University of Munich (TUM) and a faculty member at the TUM School of Management. He was a visiting scholar at the University of Cambridge (2008), HP Labs Palo Alto (2008), at Yale University (2016), and at Stanford University (2017). Martin is a faculty and board member of the Bavarian Elite Master program "Finance and Information Management" and a fellow of the Agora Group on Market Design at the University of New South Wales, Australia. He received an HP Labs eAward, the IBM Faculty Award, and the INFORMS ISS Design Science Award, and holds several patents. Since 2012 he is Editor-in-Chief of Business and Information Systems Engineering and serves on the editorial board of a number of journals including INFORMS ISR. Martin’s research interests include market design, mathematical optimization, game theory, and econometrics.