Economics of Networks

The world has become more and more connected since the appearance of the modern Internet in the early 1990s. The Internet allows buyers and sellers to match to each other directly or with the help of intermediaries. In a more connected world, buyers (sellers) can reach more sellers (buyers) and intermediaries can reach more buyers and sellers at the same time. It is not clear whether such change strengthens or weakens the bargaining power of the parties involved. Graph theory and (non-cooperative and cooperative) game theory are introduced in this course to shed light on these issues.

Graph theory can also help us understand link analysis and Web search. Building on this, game theory is used to provide an analysis of how sponsored search markets work. Other topics covered by the course include: information cascade, network effects, power laws, and rich-get-richer phenomenon.