Undergraduate Networks

Course Description

Markets increasingly use and create networks, both social and technological. Some examples: the complex trading networks that underlie modern financial markets and supply chains; social media platforms; dating apps. These profoundly affect the economy and society more broadly: financial interdependencies are critical in economic crises, while rumors on Twitter have come to play a central role in our politics. How can we make sense of these phenomena—as individuals, within companies, and as policymakers? This seminar teaches models from the economics and statistics of networks that are essential to the task. Topics include the network origins of recessions, the diffusion of information and rumors, racial segregation, and matching markets. We emphasize how network models relate to key ideas from microeconomics.

Textbooks and readings

Required

  • [EK] David Easley and Jon Kleinberg, Networks, Crowds and Markets, Cambridge University Press, 2010.
    There is a full-text version available online.
  • [J-HN] Matthew O. Jackson, The Human Network, Pantheon, 2019.

Recommended

Topics and materials

[Problem sets (zip)]             [Presentation topics (zip)]

Instructors, please contact me for solutions.

Topic

1. Introduction to the course and basic graph theory

Required

  • [EK] David Easley and Jon Kleinberg, Networks, Crowds and Markets, Cambridge University Press, 2010.
    There is a full-text version available online.
  • [J-HN] Matthew O. Jackson, The Human Network, Pantheon, 2019.

Optional

  • [J-SEN] Ch. 1, 2, 3: Basic culture / background.

2. Viral processes and their relatives

  • [EK] Ch. 21: Branching process.
  • [J-HN] Ch. 3
  • [J-SEN] Ch. 4, Sec. 7.1, 7.2: Bass model

3. Networked markets and platforms

  • [EK] Ch. 17: Platform model (markets with network Effects)
  • Rochet and Tirole (2003), “Platform Competition in Two-sided Markets,” Journal of the European Economic Association

4. Basic game theory

  • [EK] Ch. 6
  • [J-SEN] Sec. 9.9

5. Network games with discrete actions and coordination

  • [EK] Ch. 19
  • [J-HN] Ch. 4, 8

6. Basic network centrality theory

  • [EK] Ch. 13, 14, excluding advanced material
  • [J-HN] Ch. 2
  • [J-SEN] Ch. 2

7. Economic manifestations of centrality: propagating impulses through agents; DeGroot learning

  • [EK] Ch. 16
  • [J-HN] Ch. 7
  • [J-SEN] Ch. 8
  • Ben Golub and Evan Salder, “Learning in Social Networks,” Oxford Handbook of the Economics of Networks. (2016)

Graduate Networks

Course Description

This course prepares students for pure and applied research in the economic theory of networks. Topics covered include the macroeconomic network of production and trade; games of investment with social spillovers (education, criminal activity); financial contagion and other externalities; diffusion of beliefs and behaviors; segregation and homophily; and networked markets. The course emphasizes portable methods, including the linear algebra behind centrality measures; random graph theory; branching processes; power laws and Pareto tails. Prerequisites: basic microeconomic theory at the level of Econ 2010a,b; probability at the level of an advanced undergraduate course.

Textbooks and readings

Required

  • [EK] David Easley and Jon Kleinberg, Networks, Crowds and Markets, Cambridge University Press, 2010.
    There is a full-text version available online.
  • [G] Sanjeev Goyal, Connections: An Introduction to the Economics of Networks. Princeton University Press, 2009.
  • [J-HN] Matthew O. Jackson, The Human Network, Pantheon, 2019.
  • [J-SEN] Matthew O. Jackson, Social and Economic Networks. Princeton University Press, 2008.

A useful collection of surveys:

  • [BGR] Yann Bramoullé, Andrea Galeotti, and Brian W. Rogers, eds., The Oxford Handbook of the Economics of Networks, Oxford University Press, 2016.

In addition, course material will include readings from the media, primary research literature, and readings from other books.

Topics and materials

Topic

1. Introduction to the course and basic graph theory

Required

Required pleasure reading

  • [EK] Ch. 1, 2
  • [J-HN] Ch. 1

Key substantive reading

  • [J-SEN] Ch. 1, 2, 3: Basic culture/background.

Optional

  • Review of [EK]: Shalizi, C. “Connecting the Dots.” American Scientist 99 (2011).

2. Viral processes and their relatives

OLG transmission model

Required pleasure reading

  • [J-HN] Ch. 3

Key substantive reading

  • [EK] Ch. 21: Branching process.
  • [J-SEN] Ch 4, Sec. 7.1, 7.2: Bass model.

Optional theoretical reading

  • If you know basic martingale theory: Durrett, Probability: Theory and Examples, Sec. 4.3.4
  • Bollobás, B., Borgs, C., Chayes, J., & Riordan, O. (2010). “Percolation on dense graph sequences,” The Annals of Probability, 38(1), 150-183.

Optional further reading

  • Banerjee, A., Chandrasekhar, A. G., Duflo, E., & Jackson, M. O. (2013). “The diffusion of microfinance.” Science, 341(6144), 1236498.
  • Vosoughi, S., Roy, D., & Aral, S. (2018). “The spread of true and false news online.” Science, 359(6380), 1146-1151.
  • Kremer, M. (1996). Integrating behavioral choice into epidemiological models of AIDS. The Quarterly Journal of Economics, 111(2), 549-573.
  • Geoffrey West on scaling laws in animals, cities, etc.

3. Networked markets and platforms

Key substantive reading

  • [EK] Ch. 17: Platform model (markets with network Effects).
  • Rochet and Tirole (2003), “Platform Competition in Two-sided Markets,” Journal of the European Economic Association

Optional further reading

4. Network structure and formation

Required pleasure reading

  • [EK] Ch. 3, 4, 20
  • [J-HN] Ch. 5, 9

Key substantive reading

  • [J-SEN] Ch. 5, 6
  • [G] Ch. 7, 8, 9

Optional theoretical reading

  • Durrett (2007), Random Graph Dynamics.

Optional further reading

  • Gabaix (1999). “Zipf’s Law for Cities: An Explanation.”
  • Jackson and Rogers (2007). “Meeting Strangers and Friends of Friends: How Random Are Social Networks?”

5. Network centrality theory and peer effects in networks

Required pleasure reading

  • [EK] Ch. 13, 14, excluding advanced material

Key substantive reading

  • Carl D. Meyer, Matrix Analysis and Applied Linear Algebra. SIAM: 2010., Ch. 7 and 8 (skim the parts you know, read the parts you don’t)

6. Economic manifestations of centrality: propagating impulses through agents
A. Network games with continuous actions

Notes on linear best-response network games

Required pleasure reading

  • [J-HN] Ch. 2

Key substantive reading

  • [J-SEN] Sec. 9.5.2
  • Ballester, Coralio, Antoni Calvó-Armengol, and Yves Zenou. “Who’s who in networks. Wanted: The key player.” Econometrica 74.5 (2006): 1403-1417.

Optional theoretical reading

  • [G] Ch. 10

B. DeGroot learning and its relatives

Required pleasure reading

  • [EK] Ch. 16
  • [J-HN] Ch. 7

Key substantive reading

  • [J-SEN] Ch. 8
  • Ben Golub and Evan Salder, “Learning in Social Networks,” Oxford Handbook of the Economics of Networks. (2016)

Optional readings

  • Banerjee, A., Chandrasekhar, A. G., Duflo, E., & Jackson, M. O. (2019). “Using gossips to spread information: Theory and evidence from two randomized controlled trials.” The Review of Economic Studies, 86(6), 2453-2490.
  • [G] Ch. 5