Designing Better Markets, One Question at a Time

An introduction to Lea Nagel, Assistant Professor of Economics

Growing up in Germany, Nagel was drawn equally to mathematics and the social sciences. Economics, she discovered, offered a rare opportunity to bring the two together. “It felt like a natural place to do both,” she says—using rigorous methods to study institutions, markets, and decision-making. She pursued her undergraduate degree at Humboldt University in Berlin, followed by a master’s degree at the London School of Economics, and then a PhD at Stanford University.

It was during the final year of her undergraduate studies that Nagel first began to seriously consider an academic career. Writing her undergraduate thesis—and spending a semester abroad at New York University—introduced her to research as an open-ended process. “For the first time, I was working on an unstructured project with no defined goal in the end,” she recalls. “I really enjoyed the process of refining my own research questions and developing the tools that I needed to answer them.”

That early project, at the intersection of economic theory and behavioral economics, turned out to be more than a one-off experience. It laid the foundation for a research agenda that has continued to evolve ever since.

Developing a Research Agenda

Nagel’s doctoral work at Stanford culminated in a dissertation that brought together market and mechanism design with insights from behavioral economics. Two of its chapters focus on designing institutions that function well even when participants deviate from the standard assumption of full rationality. Rather than relying on complex incentives, these designs aim to make optimal choices easier to understand—an approach with clear applications to settings like school choice mechanisms and auctions.

The third chapter takes a step back to investigate a long-observed phenomenon in auction markets: the winner’s curse, in which the winning bidder in a common-value auction often ends up overpaying. Through experimental methods, Nagel and her co-authors examine which behavioral deviations drive this outcome, laying the groundwork for future research on auction formats that can mitigate such effects.

Today, her work continues along this trajectory, under the broad umbrella of behavioral mechanism design. The central question remains how to build institutions that are robust to the ways people actually behave—accounting for heuristics, informational constraints, and limited cognitive and computational resources—rather than how we assume they should behave.

Bringing Students to the Frontier

This spring, Nagel is teaching her first course at Harvard: ECON 2049, a second-year graduate class titled Topics in Mechanism and Market Design. Closely aligned with the research she does on a daily basis, the course will cover both classic and novel results in market and mechanism design. “I will include some papers at the frontier to show where the recent research has taken us,” she says, “and which directions are potentially promising avenues for the students to pursue themselves.”

Teaching and mentoring are areas where Nagel hopes to draw heavily on her own experience. Her decision to pursue academia, she notes, was strongly shaped by mentors—particularly during her undergraduate years—who helped her understand the range of possibilities an economics degree can open. “I do hope that, especially in undergraduate teaching, I can help students understand the different paths that are going to be available to them,” she says. "There are so many things you can do with this degree, and I think that giving students an insight into the different paths, including the ones they might not know from home, is particularly valuable at that stage."

Having completed degrees in three different countries, Nagel has been exposed to a wide variety of teaching styles and academic cultures. “I hope that that's going to help me find a teaching style and find a way to interact with the students that works for students from all different kinds of backgrounds” she says.

Advice from the Job Market

Reflecting on the research process itself, Nagel emphasizes how misleading solely reading finished papers can be to those just starting out. “When I look back at my projects now, and then go back to the very first version, it's almost unrecognizable,” she says. “I think, as a student, often you see successful finished papers, and you may get discouraged thinking that you can never come up with such a project. But,” she explains, “the key is teaching students that nobody starts with that complete of a project. We all start with a little example or a conjecture that we might have, and then it just continues to evolve as you dig deeper.” Learning to stay motivated through that evolution—continuously refining questions and methods—is a central part of becoming a researcher.

That intrinsic motivation, she believes, was also key during the academic job market. “I think if you are genuinely curious, and you really want to engage with the ideas, then it's much easier to navigate the many conversations that you will have on the job market, most of them with researchers you've never spoken to before,” she says. Her practical advice to job market candidates is simple but important: stay in close contact with advisors. “They have much better information than whatever you can find online, so whenever I was really unsure about some part of the process, I would just reach out to one of my advisors and they would help me make sure I'm on track.”

Why Harvard?

Harvard, for Nagel, stood out as a natural fit. Her work sits at the intersection of fields, and she values an environment where ideas move fluidly across disciplines. “Harvard has an exceptional economics department, where faculty do outstanding research in about every area of economics. There are also many faculty members who work at the intersection of fields,” she says. “That leads to a community where we are continuously exchanging ideas across fields, and even across departments, for example with faculty from the Harvard Business School across the river.”

Nagel’s Littauer location is equally a good fit. “One of the main chapters of my thesis was inspired by the job market paper that Shengwu Li wrote for his thesis in 2016. Getting to work across the hall from him every day and talking to him about ideas is fantastic,” she says. “Yannai Gonczarowski also does research that's very closely related to what I do – he's across the hall as well.”

While she delights in her location in Littauer, she is eagerly awaiting the move to the new building. “The theorists came up with a mechanism to allocate the offices in the new building,” she explains. “I already picked the new office. I can see the construction site from my window right now, so I'm watching the process as it unfolds.” She shares photo updates with her parents back in Berlin – an architect and a civil engineer – getting their take on the progress.

Outside of economics, Nagel, who doesn’t drive, gets around by walking, biking, or taking public transit – “Boston is definitely the right place for me,” she jokes. She also enjoys learning languages and can comfortably hold conversations in several, a hobby she continues to pursue alongside her academic work.

For Nagel, economics remains what first drew her to the field: a way to ask meaningful questions about how people interact with institutions—and to design systems that work better in the real world, not just on paper.