Mondays and Wednesdays, 1:15 PM-2:30 PM
Terman Engineering Center, Room 453
3 units
Instructor:
Ramesh Johari
Assistant Professor
Management Science and Engineering
Electrical Engineering (by courtesy)
Terman Engineering Center, Room 319
E-mail: ramesh.johari@stanford.edu
Office hours: Mondays, 2:30 PM-3:30 PM, Terman 319
Additional office hours by appointment
Course description:
This course aims to provide a rigorous introduction to problems at
the interface between economics and engineering, for doctoral students
with a research interest in the area. Students will be introduced to
key concepts from game theory and market design, with an emphasis on
network applications. The course will particularly emphasize
constraints placed on market mechanisms due to the architecture of networks. While the course will primarily be taught in
lecture format, the focus will be on encouraging discussion of open
questions and modeling issues.
Outline of topics:
The first 5-6 weeks of the course will cover the following
foundational
material, supplemented by examples drawn from network applications:
- Motivating applications for economic analysis in engineering
applications, such as: resource allocation in communication networks
and electric power systems; interdomain routing in the Internet; and
free riding in peer-to-peer systems.
- Basic elements of economic modeling: utility, efficiency, and
some elementary social choice theory (particularly Arrow's
impossibility theorem).
- Notions of equilibrium for static settings: competitive
equilibrium, Nash equilibrium, correlated equilibrium, Bayesian
equilibrium, and dominant strategy equilibrium; as well as the
different knowledge assumptions made by various notions of equilibrium.
- Dynamic models for engineering contexts: the dynamics of
competitive equilibrium, basics of dynamic and repeated games,
learning.
- An introduction to mechanism design: implementation theory in
dominant strategy equilibrium, Bayesian equilibrium, and Nash
equilibrium; and a thorough discussion of the problems in adapting
traditional mechanism design to network contexts.
The final 4-5 weeks of the course will be devoted to a discussion of
recent research results in the field and development of more advanced
models, with a view towards open
problems and interesting directions for future study.
The grade will be based on the following:
- 30% 2-3 problem sets
- 70% final project
The choice of topics for the final project will be quite
broad: students can choose to either discuss and present recent
research results in the field, or develop their own problem statement
and analysis. Since the focus of the course will be on modeling, many
opportunities for game theoretic problem formulation and analysis
should be possible throughout the quarter.
The listed prerequisite is a basic course in optimization, such as
MS&E 211 or equivalent. Because the course will have significant
mathematical depth, real analysis at the level of Mathematics 115 is
recommended (see below).
Since this is a doctoral course with a strong focus on developing
theoretical tools, students should bear the following in mind:
- While no prior exposure to game theory or mechanism design will
be assumed, the basic elements will be covered rather quickly; thus,
students with no prior experience should be prepared to devote time
outside of class to master the basics.
- Students will be expected to demonstrate a significant degree of
mathematical maturity, particularly in reading and writing rigorous
proofs. Basic real analysis concepts will be assumed, such as
continuity, limits, convergence, open and closed sets, compactness,
convexity, etc.
There will be no required textbook for this course. However, you may
find some of the following books helpful. The first three books that
are listed are highly recommended; the remainder are a list of various
books that I have found useful.
- A Course in Game Theory, Osborne and Rubinstein. This is
a good introductory level text in game theory, that still is quite
rigorous. Although many game theory books are out there, I have found
that this one is a good introduction for engineers.
- Microeconomic Theory, Mas-Colell, Whinston, and Green.
This very large textbook is an encyclopedic reference on the subject,
and in particular has one of the best introductory chapters on
mechanism design (Chapter 23).
- Putting Auction Theory to Work, Milgrom. This recent text
by Stanford's own auction theory expert is an excellent way to learn
the essentials of the theory; using a few basic technical ideas, he
presents a mathematically unified account of all the key results.
- Game Theory for Applied Economists, Gibbons. This is a
basic undergraduate level text in game theory, appropriate if you have
never seen the subject before; it provides an elementary treatment of
most of the major topics.
- Game Theory, Fudenberg and Tirole. This encyclopedic
reference should be on the shelf of every game theorist, but it is not
necessarily the easiest book to learn from.
- Auctions: Theory and Practice, Klemperer. This is another
survey book on auction theory, but most of the material can be found
online on Klemperer's web page, and through earlier papers.
- Auction Theory, Krishna. This is a standard introductory
text book on auction theory.