Community Research and Development Information Service - CORDIS

Better macroeconomics for a healthier economy

A new macroeconomics framework is slated to help improve job markets and streamline bank auctions. It also paves the way for facilitating applied work in trading networks.
Better macroeconomics for a healthier economy
Microeconomic theory is pivotal for understanding economic output, inflation and unemployment. Within macroeconomics, the field of matching markets and auctions represents an increasingly important tool to allocate scarce resources among competing individuals or firms.

Against this backdrop, the EU-funded project CPMMA (Complex preferences in matching markets and auctions) built a framework that brings together matching and auction settings. It highlighted how these settings interrelate and how this enables market participants to communicate their increasingly complex preferences.

The result of such a framework can help improve performance of entry-level job markets. It can also enhance auction processes related, for example, to providing liquidity to financial institutions and to EU Member States that want to finance their sovereign debt.

In parallel, the team studied trading networks to better model a decentralised market. They investigated different forms of substitutability, a key restriction in market agents’ preferences for establishing equilibria and other useful properties such as matching, auctions and exchange economies with indivisible goods.

CPMMA then introduced new substitutable preferences to model intermediaries with production capacity, underlining how substitutability is preserved in, among other things, trade endowments, mergers and limited liability. This helps agents outline richer preferences.

In the second part of the project, the team considered issues in the trading networks framework. It looked at how cooperative solution concepts in game theory such as stability rely on coordinated deviations by large groups of agents. CPMMA also studied the concept of competitive equilibrium with personalised prices, noting how these should be calculated more accurately.

Another issue under study focused how econometricians can better estimate relevant parameters using conditions that emerge from cooperative solution concepts or from equilibrium requirements. This led to examining how econometricians can test whether an outcome in a particular market satisfies those conditions. In this way, the project’s results have effectively revealed how applied work in trading networks can be simplified.

Related information


Life Sciences


Macroeconomics, auctions, trading networks, matching markets, CPMMA
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