After reading some of the work on market design by Alvin Roth and Lloyd Shapley that earned them the Nobel Prize in Economics this year, I realized it has some implications for those of us in the start-up and social media/gaming space. In particular, the underlying research on market design could help make raising capital more efficient.
Market design
It is interesting to understand the underlying principles of market design that Roth and Shapley helped explain. According to the theory, there are many markets that operate where the assumption of perfect competition is not satisfied. There are many goods that are individual and heterogeneous, whereby the market for each type of good becomes very thin. A great example is tech and social media start-ups. Each company is different and there is not a direct trade-off between investing in company A and company B, as each has a different management team, concept, etc.
If a worker is hired by Employer A but would have preferred to work for Employer B, who also would have liked to hire this worker (but did not), then there are unexploited gains from trade. If employer B had hired the worker, both of them would have been better off. Shapley, in research with David Gale, defined a pairing to be stable if no such unexploited gains from trade exist. Continue reading “How Nobel Prize winning market design theory can help social media and tech companies”
I am equally optimistic about prospects for tablets. Amazon’s new line of Kindle Fires will be a huge holiday seller. The devices are attractively priced, and the ability to focus holiday shoppers’ attention on the devices on the Amazon.com home page and through cross promotion ensures millions will see—and many likely buy—the new tablets. Barnes & Noble’s new Nook tablets share a similar advantage. Again, they are very attractive devices at even better price points. Barnes & Noble also has huge retail reach, with 689 stores and 667 college bookstores, all of which will be prominently showing the new Nook tablets during the holiday shopping season. In addition to these very attractively priced devices that will be in consumers’ faces this holiday season, Samsung (the second largest manufacturer of mobile devices) has a strong line of tablets (including the intriguing Galaxy Note Tab). Also, do not forget Google, that little California company, who has the resources to push its attractive Nexus tablet. 
To me, one of the most exciting opportunities in social media and gaming is in the truly emerging markets, the countries one or two economic tiers below what is currently considered the emerging economic group (the latter consisting of countries like Brazil, Russia, India and China). 
The Business of Social Games and Casino 