Economic Systems Design

ESD has its origins in the class of smart computer-assisted markets (SCMs) designed and studied by Kevin McCabe, Mark Olson, David Porter, Stephen Rassenti, and Vernon Smith. This work was initiated by Stephen Rassenti's Ph.D. dissertation at the University of Arizona, 1981, developing the general concept of the SCM, and the specific concept of the combinatorial auction. A number of industrial applications of SCMs have been developed for the trading of pollution rights, the auctioning of spectrum licenses, and SCMs for the allocation of electricity, water and gas in transmission networks. ICES faculty have performed major industrial contracts on electric power market design and on tests of the FCC combinatorial auctions for spectra licenses.

In 1996 and 1997 Mark Olson and Dave Porter devised the first completely automated exchange market using complex combinatorial algorithms for application to the trading of interregional pollution permits in Southern California whose use continues to expand. A modification of this exchange is under consideration for application to the European community. Innovative new decentralized market allocation mechanisms for manifesting Space Shuttle secondary payloads as well as allocating resources for instrument measurements among competing science teams on NASA's Cassini mission to Saturn and the private/public LightSAR earth mapping mission has been pioneered by Dave Porter. The principles used in the development of these institutions were successfully transferred to the private sector to allocate logistic services for Sears Roebuck and the pricing of thinly traded bonds for State Street Bank.

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