Economics of Networks (graduate course)

Wednesday, 1 October, 2008 (All day)
University of the Aegean
University of the Aegean, Department of Cultural Technology & Communication, Master in Informatics

In the classical writing Odyssey of Homer, the blind prophet Tiresias advises Odysseus that: “It is the journey, not the destination.” (Homer, 1952). This poetic prose could be considered as the first recognition that the connecting links are more important than the nodes themselves. Similar ideas are basic parts of Systems theory (Von Bertalanffy, 1968) with wide application in science (e.g. control theory, operations research, social systems theory, systems biology, systems engineering and systems psychology). The growing importance of networks, as the visual and algebraic representation of systems, has been dramatically accelerated by the emergence of digital and Web technologies. Costless information representation and communication enabled the massive formation and maintenance of human networks in global scale. In this new interconnected and globalized world, links and flows through them, in many cases, are becoming an important source of value. Since networks have been created to focus on the analysis of interconnected co-evolving objects, emerged naturally as one of the leading modeling paradigm in many modern scientific fields.

Economic networks are considered to be a special category of networks in which their main objects of study or/and their links and evaluation functions are related to economic motives, actions and implications. Network goods are nodes in economic networks characterized by a fundamental property: interdependent positive utility. The utility of the existing network increases with an additional user. This means that the law of diminishing returns no longer holds, at least until the network has reached its optimal size.

 In this course we examine the origins of network externalities and effects, different types of network effects, important issues related to network goods and the emerging network externalities in the Web.

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