bridging concepts
Recently, I’ve come to realize that there is a nuanced distinction between mechanism design and market design. Initially, I conflated the two, but a deeper dive into the subject matter—prompted by a friend’s bachelor thesis—has elucidated the critical differences.
Mechanism design is inherently algorithmic, centered around eliciting information and strategically manipulating incentives through mathematical formulations. It’s a toolset for creating environments where desired outcomes can be achieved based on the information asymmetries and strategic interactions of participants.
Conversely, market design examines the architecture of marketplaces, focusing on their operational efficiencies and dysfunctions. This includes addressing issues such as market thickness, unraveling, and congestion, with a keen eye on the collective behavior of the marketplace’s participants.
black-gold of the era
Our venture into data trading illuminated the unique nature of digital information compared to traditional commodities like oil. Data’s near non-rivalrous nature, ease of transfer, and usage-dependent value proposition mark it as a fundamentally different asset. For instance, the value derived from a comprehensive database of scholarly articles varies significantly between an undergraduate student and a tech giant training AI systems, underscoring the inherent uncertainty in data’s value without actual deployment.
the market or mechanism of trading data
The paper Research on Data Asset Trading Mechanism Based on Blockchain Technology proposes a mechanism where data ownership and usage rights are delineated through blockchain technology, employing non-homogeneous tokens (NFTs) to manage these rights distinctly.
However, this paper, while insightful, also reflects the challenges of basing research on the nascent and highly regulated Chinese data trading market. The opacity and underdevelopment of these official trading centers raise questions about the viability and efficiency of proposed mechanisms in a real-world context.
Firstly, the reported estimates of market size are somewhat misleading, as the figures I’ve encountered from various sources are inconsistent. Additionally, trading platforms such as the Shanghai Data Exchange appear to be in their infancy, characterized by limited options, exorbitant prices, and oversimplified functionalities. While the Shanghai Data Exchange claims success, showcasing ostentatious case studies on its website, the reality of making a purchase involves significant friction and inconvenience. This may be due to the critical nature of the data provided (e.g., airline schedules, parking availability, or population statistics), which perhaps should not be freely traded on the market. In any case, the market is thin and fraught with friction, far from the seamless purchasing experience platforms like Amazon or Taobao offer. It is slow and congested, and frankly, there remains considerable room for improvement, which, in turn, highlights its potential for development.
How can one expect a block-chain enabled, two-stage price-elicitating trading mechanism to boost the market? A market can hardly work without a core mechanism. Yet, a theoretically working mechanism doesn’t seem to be a paneasea to a yet young market to grow, mature and prosper.