Lecture: Economics and Computation (Spring 2013)

In this course we will cover the interplay between economic thinking and computational thinking as it relates to electronic commerce in particular, and socio-economic systems in general. Topics covered include: game theory, mechanism design, p2p file-sharing, eBay auctions, advertising auctions, human computation systems, matching markets, prediction markets, and recommender systems. Emphasis will be given to core methodologies necessary to design such systems with good economic and computational properties. Students will be engaged in theoretical, computational, and empirical exercises.

• 10.6.2013: The final exam will take place in AND-3-02 from 14:00-15:45. Please be on time.
• 23.5.2013: The last chapter is now uploaded to NB and the comprehension questions are online.
• 22.5.2013: The new chapter will be uploaded to NB by the end of today (Wednesday, May 22nd). The comprehension questions will be due on Wednesday, May 29th.
• 17.5.2013: Please note that there will be no Section next week, on Thursday 23.5.2013.
• 16.5.2013: The new assignment "Collaborative Filtering" is now online.
• 11.5.2013: Blog article (in German): Ökonomische Ingenieurskunst.
• 8.5.2013: Sample questions and list of topics for the final exam posted on NB.
• 6.5.2013: Important: Switch of lecture and section in last week of the semester:
  • Monday, 27.5.2013, 14:00-15:45: Section/Review, in room BIN 1.D.22
  • Thursday, 30.5.2013, 12:15-13:45: Lecture on "Online Platforms", in room AND-3-02
• 3.5.2013: Live Webcast on Who Gets What: The New Economics of Matchmaking and Market Design, with 2012 Nobel Laureate Alvin E. Roth.
• 1.5.2013: We made some small changes to the "Prediction Markets" chapter. Please download the new version from NB.
• 25.4.2013: The new assignment "Programming the Crowd" is now online.
• 23.4.2013: A new version of the "Scoring Rules" chapter is now on NB and the comprehension questions are posted.
• 23.4.2013: The chapter "Crowdsourcing Markets" contained some errors. A new, updated version is now on NB. Please make sure you use the new version when preparing for the final.
• 18.4.2013: Comprehension questions for Crowdsourcing Markets are now online. Because of the delayed upload of this week's chapter, the comprehension questions for next Monday are not mandatory. However, please at least fill out the last question to indicate which parts of the chapter where difficult to understand. Thanks!
• 18.4.2013: Chapter 15 (Crowdsourcing Markets) now available on NB!
• 9.4.2013: Some fun/interesting blogs and podtcasts:
  • Freakonomics Radio is a great podcast. For example, they have one show on repugnance and kidney exchanges.
  • Freakonomics also has a great blog with many new posts per week, for example on matching and school choice.
  • Al Roth, who won the 2012 Economics Nobel Prize together with Lloyd Shapley, has a great blog on market design.
• 9.4.2013: Slight change of the homework assignment schedule (see below)
• 28.3.2013: New version of "Matching Markets" chapter now on NB!
• 12.3.2013: Submission of homework assignments:
  • Reminder: the submission deadlines for the assignments are strict (before lecture)!
  • If you submit late: 25% per day penalty. 2-day max.
  • We only give extensions (without penalty) for medical emergencies (doctor’s note required) or military service.
• 27.2.2013: Rewards for finding typos and/or content errors:
  • When you found a typo/error, please post this publicly on NB. Otherwise the same typo/error will be found 20 times.
  • The teaching assistants are not eligible for the rewards ;-)
• 25.2.2013: A pre-release of the lecture notes for the second class are posted on NB.
• 19.2.2013: Room change: all lectures will take place in BIN 1.D.22. Exercise sections still take place in AND-3-02.
• 19.2.2013: Lecture slides from first class posted on NB.
  • Please read slides 27 - 54 if you left early.
  • See details on NB usage on slide 37.
  • See details on grading and response essays on slides 45+46.
• 19.2.2013: Chapters 2 through 12 posted on NB and linked to from this page.
• 18.2.2013: Sign-up link for NB: link. Please enter your real first and last name when signing up!
• 17.1.2013: PDF for Chapter 1 posted.
• 16.1.2013: Updates regarding course information and grading posted.
• 4.1.2013: Tentative course schedule posted.

Lectures (tentative schedule)

Exercise Sessions (tentative schedule)

Homework Assignments (tentative schedule)

1. This course will be structured differently from most courses at IfI: For each lecture, there will be lecture notes (approx. 15-20 pages per lecture) that students must read before class to learn the new material at their own pace. We will use the collaborative PDF annotation tool NB (nb.mit.edu) such that students can ask questions online while reading the lectures notes. Good contributions on NB will positivel influence the participation grade. Students must answer 3-4 short comprehension questions before every class to show they have completed the readings. The comprehension questions will be graded on a pass/fail basis. During class, we will not go over all of the material from the lecture notes. Instead, lectures will be interactive, illustrating the concepts from the lecture notes, and students are expected to participate during class discussions. Class participation will be graded. If a student misses a lecture but still wants a good participation grade, then he can also write a 1/2 page response essay (per lecture missed) which will then be graded instead of the class participation.
2. There is one lecture per week (on Mondays) and one exercise session (on Thursdays). Participation in the exercise sessions will be helpful to deepen the understanding of the material and to prepare for solving the homework exercises. However, attendance during the exercise sessions in not mandatory and will not be graded.
3. There will be approximately 4 theoretical homework exercises that require non-trivial mathematics to deepen the understanding of the theoretical content of the course.
4. There will be approximately 3 programming exercises where students need to apply the concepts learned in class. We will most likely the following three applications written in Java: i) sponsored search auctions, ii) crowdsourcing via Amazon Mechanical Turk, and iii) recommender systems.

The successful completion of all classes from the assessment level is required. No additional special prior knowledge is required. Any background in microeconomics or game theory would be helpful. Students need to be proficient in math to solve the theoretical homework exercises, and they need to be able to program to solve the programming homework exercises.

Recommended for all BSc and MSc students with an interest in topics at the intersection of economics and computer science.

1. Understand the importance of economic thinking in computational domains, and of computational thinking in economic domains.
2. Be able to develop applicable models of complex Internet systems.
3. Be able to analyze the behavior of systems that include people, computational agents as well as firms, and involve strategic behavior.
4. Be able to solve both mathematical and conceptual problems involving such systems.
5. Be able to write programs that implement strategic agents and mechanisms.

1. Written final exam: 50%
2. Homework exercises 35%
3. Class participation (or alternatively response essays) + NB comments: 10%
4. Comprehension questions: 5%

The grade for "participation" will be based on the student's participation during the lecture and the student's contributions to NB. If a student misses a lecture but still wants a good participation grade, then he can also write a 1/2 page response essay (per lecture missed) which will then be graded instead of the class participation. Participation during the exercise sessions is optional and will not be graded. The comprehension questions will be graded on a pass/fail basis (i.e, 1 or 0).