“Market Design […] strives to understand how the design of marketplaces influences the functioning of markets” (Roth 2018, p. 1609). The simple but powerful rationale of market design is to improve markets by actively designing them, guided by economic theory, empirical data, and carefully designed economic experiments. In recent years, economists have been successful in designing a variety of institutions, including spectrum auctions, electricity markets, feedback systems, kidney exchanges, and school choice (Chen et al., 2020). This thesis consists of four chapters, all devoted to different aspects and areas of market design. Another unifying element of this thesis is the methodology. In all chapters, laboratory experiments are conducted, data are analyzed, and the results are linked to real-world applications. Laboratory experimental studies are a particularly useful tool in the context of market design. They are often compared to a wind tunnel, where the performance of existing designs is studied in a simplified environment or even new design ideas are tested in a controlled environment (Chen et al., 2020).
The first chapter looks at auction design. We investigate the puzzle behind the popularity of a non-binding soft reserve price in practice. Here, we use the laboratory as a "wind tunnel" to compare the performance of different existing auction designs in a controlled environment. Chapter two focuses on the design of feedback systems. In this chapter, we propose a small but very effective modification to existing feedback withdrawal mechanisms. Therefore, we use the possibility of laboratory experiments to test a new design idea that has not yet been implemented in practice and for which, of course, no field data are available. The third chapter is concerned with the area of school choice. Here, I investigate the value of fairness to participants in school choice markets, which can guide a market designer in choosing an appropriate algorithm. A laboratory experiment allows for the observation and control of student preferences that are typically unobservable in field data. Finally, chapter four focuses on norm information acquisition. When designing real-world institutions, incentives must be aligned with behavior in terms of underlying goals (Bolton and Ockenfels 2012). Therefore, social norms, which are known to be a powerful force influencing behavior, are of great importance for market design. We study how economic agents choose between different types of norm information in a social choice context with uncertainty
