Dynamic Market Design

TL;DR

This paper surveys recent advances in dynamic market design, focusing on methods that transform complex dynamic problems into static models to optimize platform-mediated digital markets.

Contribution

It introduces a methodological framework for analyzing dynamic markets by examining their long-run stationary distributions, bridging static and dynamic market design approaches.

Findings

Transforming dynamic problems into static programs simplifies analysis.

Priority rules and information policies can effectively clear markets without monetary transfers.

Queues and intertemporal management help balance supply and demand over time.

Abstract

Classic market design theory is rooted in static models where all participants trade simultaneously. In contrast, modern platform-mediated digital markets are fundamentally dynamic, defined by the asynchronous and stochastic arrival of supply and demand. This chapter surveys recent work that brings market design to this dynamic setting. We focus on a methodological framework that transforms complex dynamic problems into tractable static programs by analyzing the long-run stationary distribution of the system. The survey explores how priority rules and information policy can be designed to clear markets and screen agents when monetary transfers are unavailable, and, when they are available, how queues of participants and goods can be managed to balance intertemporal mismatches of demand and supply and to spread competitive pressures across time.