Talking about theoretical models and frameworks, and practical applications of the same, I have been fascinated by Mechanism Design & Complex Event Processing.
Per Alex Tabarrok at reason.com, mechanism design is to markets what genetic algorithms are to life. He also writes that – “Mechanism design is a very general way of thinking about institutions. An institution or mechanism takes as input "messages" or "signals" from agents and it responds with an outcome. The idea of mechanism design is to create institutions that produce a desirable outcome while respecting the fact that agents have private information and are self-interested. It turns out that designing mechanisms that work well while respecting information and self-interest constraints is very difficult”.
While Mechanism Design is an economic theory, Complex Event Processing (CEP) is the use of technology to predict high-level events likely to result from specific sets of low-level factors.
A typical complex event processing use case can be found in automated stock trading using Financial Services algorithmic trading. Prior to the advent of complex event processing engines, stock traders often sat at a desk manually monitoring 5-8 screens to identify patterns in the market that indicated an opportune moment for a trade. Analytic information and patterns were often manually tracked in a spreadsheet. Today, this type of tracking can be entirely done in the complex event processing engine and a trade automatically triggered when the patterns are right. While the System is monitoring real-time market conditions, the traders gain time and mindshare to evaluate the performance of their algorithms and refine them for desirable outcomes (the premise of Mechanism Design)
Smart market (Auction) is one of the practical applications of Mechanism Design.
A complex event is what one infers from the simple events. Social Networks (a blog post, a tweet), Matching Systems (profile/preferences match), GPS Tracking and Monitoring – every single & simple event, can be combined through Complex Event Processing to drive larger more practical consumable applications that assist in desirable outcome.
