Networks and Markets

Abstract

Markets on networks challenge the standard neoclassical assumption that market interactions are anonymous and unconstrained by accounting for connections among agents. The course starts with basic concepts from game theory and graph theory, then examines applications of these tools on topics such as financial contagion, traffic networks, sponsored search auctions, kidney exchange, and blockchain.

Objective

The goal of the course is to introduce students to the economic analysis of markets on networks. Students will be able to: • Understand and apply tools from game theory and graph theory to study market interactions on networks. • Construct simple models for real-world networks and markets. • Assess the performance of markets on networks. • Design markets on networks.

Content

The course starts with basic concepts from game theory and graph theory, then examines applications of these tools with topics such as financial contagion, traffic networks, sponsored search auctions, kidney exchange, and blockchain. The course consists of five parts. 1: Introduction to Game Theory and Networks • Definition of a Game, Nash Equilibrium • Basics of Graph Theory and Networks, Paths, Connectivity, Centrality Measures 2: Games and Networks • Traffic Networks, Braess’s Paradox • Coordination and Contagion in Networks • Markets with Network Effects 3: Auctions • Single-item Auctions • Generalized Second Price (GSP), Vickrey-Clarke-Groves (VCG) Mechanism • Application to Sponsored Search Auctions 4: Matching • Matching Algorithms and Allocation Problems • Applications to Residency Matching, Kidney Exchange, School Choice 5: Economics of Internet Markets • Economics of Plaforms • Economics of Blockchains

Resources