Markets without money

Timo Mennle, Department of Informatics, Mercator Award winner 2017

There are some things that money can’t buy, like places at good public schools or access to social housing. Timo Mennle’s thesis at the Department of Informatics is devoted to such “markets without money.” He focuses on how goods can be meaningfully distributed in situations where moral or ethical concerns make monetary payments unacceptable. For example in a city where 1,000 prospective students have to be allocated to ten different high schools, it goes against our shared moral instinct if rich parents can buy their son or daughter a place at the best public school. For this reason, many school districts use central assignment mechanisms to allocate children to public schools according to their preferences.

There is the risk, however, that participants will put themselves at an advantage by making false claims, for example by overstating their preference for their second choice. “The great challenge in ‘markets without money’ is the mathematical certainty that no assignment mechanism can achieve high economic efficiency and fairness and prevent participants from making false claims about their individual preferences at the same time,” says Timo Mennle. In his thesis he studies the possible and necessary trade-offs when designing assignment mechanisms. He also demonstrates how computer algorithms can be used to redesign the rules of “markets without money” in the future to ensure that more participants receive the goods that they actually want.

More information on Timo Mennle can be found here.