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Applied
Mechanism Design
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A Market-Based Mechanism
for Allocating Space Shuttle Secondary Payload Priority
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John Ledyard, Division of Humanities and Social Sciences,
California Institute of Technology
David Porter, Economic Science Laboratory, University of
Arizona
Randii Wessen, Systems Division, Jet Propulsion Laboratory
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Publisher Here
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This is an investigation into the design
of a market-based process to replace NASA’s current
committee process for allocating Shuttle secondary payload
resources (lockers,Watts and crew). The market-based process
allocates budgets of tokens to NASA internal organizations
that in turn use the budget to bid for priority for their
middeck payloads. The scheduling algorithm selects payloads
by priority class and maximizes the number of tokens bid
to determine a manifest. The results of a number of controlled
experiments show that such a system tends to allocate resources
more efficiently by guiding participants to make resource
and payload tradeoffs. Most participants were able to improve
their position over NASA’s current ranking system.
Furthermore, those that are better off make large improvements
while the few that do worse have relatively small losses.
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2. |
Inducing
Liquidity In Thin Financial Markets Through Combined-Value
Trading
Mechanisms
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John Ledyard,
Division of Humanities and Social Sciences, California Institute
of Technology
Peter Bossaertsa, Center
for Economic Policy Research
Leslie Finec, Hewlett
Packard
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Publisher
Here
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Asset pricing theory hypothesizes that
investors are only interested in portfolios; individual
securities are evaluated only in terms of their contribution
to portfolio
riskand return. Yet, standard nancial market design is
that of parallel, unconnected markets, whereby investors
cannot submit orders in one market conditional on events
in others.
When markets are thin, this exposes them to substantial
execution risk. Fear of ending up with unbalanced portfolios
after trading may even keep investors from submitting orders,
further eroding liquidity and the ability of markets to equilibrate.
The suggested solution is a portfolio trading mechanism
referred to as combined-value trading (CVT). Investors
are allowed to submit orders for packages of securities
and the system matches trades and computes prices by optimally
combining portfolio orders in an open book. We study the
performance of the CVT mechanism experimentally and compare
it to the performance of parallel, unconnected double auctions
in experiments with similar parametrization and either
a similar number of subjects or substantially thicker markets.
We present evidence that our portfolio trading mechanism
facilitates
equilibration to the extent that the thicker
markets do. Inspection of order submission and trade activity
reveals
that subjects manage to exploit the direct linkages between
markets enabled by the CVT system.
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