Institutional design is a new interdisciplinary field drawing on theory, controlled experiments, econometrics, computer science, and operations research. It uses formal mathematical models to predict how rules, institutions, and information influence human behavior. It uses naturally occurring data from the field to obtain insights into how similar rules and institutions have performed in practice. It uses controlled experiments to “wind-tunnel” the actual performance of new designs before they are implemented in practice and at scale. In other words, institutional design takes an engineering approach to designing markets, regulations, networks, and policies.
Two research areas are described below:
How to fairly and efficiently divide physical property or property rights is an age-old problem. It arises, for example, when a partnership is dissolved: Which partner retains the partnership, and how much compensation does he pay to the partners giving up their interest? Similarly, when participants have equal priority but can be served only one at a time, then who is served first? Who is served second, and so on. What monetary compensation should those served sooner pay to those served later? This research designs and studies auctions and other mechanisms that can be used to fairly and efficiently allocate property and rights. It also studies fair and efficient allocation mechanisms when monetary transfers are not possible, e.g., when assigning students to public schools.
Economics has provided a rich and deep understanding of bargaining over a single issue, e.g. negotiating on a trading price. However, examples of bargaining over multiple issues abound, from labor contracts with multiple perks, procurements, to climate change agreement treaties. A key difference when there are multiple issues is that parties must discover the agreement scope as well as identify trading prices (how to share the pie on each issue that should be traded). The research aims to enhance our understanding of such situations with a series of experiments that examine the determinants of bargaining and the type of institutions that facilitate efficient agreements.
Driven by cutting-edge theory and informed by data, we design transformative practices and institutions to elevate economic and social well-being.
Co-director C-BID
Continued study of the determinants of the bargaining process brings forth new insights regarding bargaining with multiple issues.
Co-Principal Investigator C-BID
© Center for Behavioral Institutional Design, 2025.
