Vernon L. Smith

In 1956 I began doing laboratory experiments designed to investigate the performance and function of markets as spontaneous group decision systems for allocating resources. By the 1980s this methodology had become an important established technique for testing theories and models of markets, for the study of trading institutions as rule systems, and for the design of new market forms. Market design in the form of electronic exchange is now an exciting area of research including new types of auctions, trading mechanisms for pollution restriction, spot market pools for electric power and water, and so on. Central to some of these new mechanisms is the concept of smart, computer-assisted markets, in which the decentralized bids to buy product, offers to sell product, and offers to transport it are processed by computer algorithms to yield prices and allocations that maximize the gains from exchange.