**Instructor: **

** **

XiangYang Li. Office: Stuart Building 237D. Email xli@cs.iit.edu. URL: www.cs.iit.edu/~xli

** **

**Why this course?**

** **

A large part of research in computer science is concerned with
protocols and algorithms for interconnected collections of computers. An
implicit assumption often made by the designer of such an algorithm or protocol
is that the participating computers will act as instructed -- except, perhaps,
for the faulty or malicious ones. With the emergence of the computer networking
as the platform of computation, e.g., grid computing, wireless networks and
peer-to-peer networks, this assumption can no longer be taken for granted.
Computing devices and communication terminals belong to different persons or
organizations, and will likely do what is the most beneficial to their owners,
i.e., act selfishly. We cannot simply expect
them to faithfully follow the designed protocols or algorithms without any
deviation. It is more reasonable to expect that each selfish computer will try
to manipulate it for its owners' benefit. An algorithm or protocol intended for
selfish computers must therefore be designed in advance for this kind of
behavior! Such protocols and algorithms will likely involve incentives to the
selfish participants. In this course, we will learn some theoretical tools that
could be used by systems' engineers to achieve certain system goals for the
global behavior of the network.

** **

**Course description: **

** **

A mathematically rigorous investigation of the interplay of economic
theory and computer science with an emphasis on the relationship of incentive
compatibility and computational efficiency. Particular attention is paid to the
formulation and solution of mechanism-design problems that are relevant to data
networking and Internet-based commerce. Suitable for mathematically inclined
advanced undergraduates and first- or second-year graduate students in Computer
Science, Economics, or closely related fields.
CS430, CS535 or equivalent background in algorithms and complexity
theory are an essential prerequisite.

**Note on the prerequisite: **

** **

It really is essential that students have a firm grounding in the basics of theoretical computer science before
enrolling in CS595: Economics and Computer Science. If you are unsure about
whether you have the necessary background, you should read the paper "Algorithmic Mechanism
Design," by Nisan and Ronen and the thesis chapter "Interactive
Combinatorial Auctions: Achieving Economic and Computational Efficiency,"
by Parkes. If you have trouble understanding either of these after spending
sometime on them, then you should not enroll in this CS595.

**Rough topic outline: **

Rather than survey the entire potential intersection of economic theory
and computational theory, we will concentrate on four topics of current
interest: routing, multicast cost sharing, digital-goods auctions, and
information markets. Below, you will find a list of papers on each topic, plus
some other related material. Required
reading for each class will be posted as the semester progresses and will be
drawn primarily from the list below.

**Requirements:**

Every student is required to do a final paper or programming project,
due in class on the last day. Topics
must be discussed with and approved by Professor XiangYang Li before the middle
of the semester. In addition,
undergraduates will have to do a PowerPoint presentation to the class of one of
the required papers, and graduate students will have to do one or two such
presentations. Whether we will do presentations by group of students depends on
how many students we will have.

The lecture notes in PowerPoint format (some slides are borrowed from
other online course materials).

Chapter 1: Introduction

Chapter 2: Game Theory

Chapter 3: Internet Routing

Chapter 4: Auction (some collections about auction and cooperative
games)

Chapter 5: Cooperative Games

Important Announcement for Presentation of CS595

- Every
student will do at least one presentation. You can do more if you want.
- It is
recommended that you select one paper of the following topics: Routing,
Multicast Cost Sharing, or Digital Goods Auctions. If you want to present
some paper out of this list, please send me the PDF file and PD file
first. You can present the paper only if I confirm the selection by you.
- We
will start the presentation on July 26
^{th}and 28^{th}. - Each
presentation is made only by one student and is about 45 minutes. So we
will have three presentations per day.
- Each
one of you has to send me an email to reserve the time slot for
presentation. The email could be like “I want to reserve the time slot 1
for July 26
^{th}” The email has to be sent to me before July 18^{th}.

We will have one take home exam. The exam will be

- Reading
one paper that I will give to you.
- Answer
some questions I will ask to you about the paper.
- The
answer should be written and emailed to me.

The two papers to read for the final exam are

- Truthful multicast in
selfish wireless networks (PDF file).
- Sharing the Cost of Multicast
Transmission, and (PDF file
here)

After you read these two papers, please write your answers to these questions. **The deadline to submit your report is July 31 ^{st} 2004**.

The following information is collected by Professor Feigenbaum.

**Introduction:**

"Algorithmic
Mechanism Design," by N. Nisan and A. Ronen, Games and Economic
Behavior 35 (1-2) : 166--196. 2001.

"Algorithms
for Selfish Agents -- Mechanism Design for Distributed Computation,"
by N. Nisan, STACS
1999: 1-15.

"Interactive
Combinatorial Auctions: Achieving Economic and Computational Efficiency,"
by D. Parkes, AAAI/IAAI
2000: 74-81.

"Algorithms,
Games, and the Internet," by C. Papadimitriou, ICALP
2001: 1-3.

"Distributed
Algorithmic Mechanism Design: Recent Results and Future Directions,"
by J. Feigenbaum and S. Shenker, DIALM 2002: 1-13.

**Routing:**

"Algorithmic Mechanism Design," by N. Nisan and A. Ronen, Games and Economic Behavior 35 (1-2) : 166--196. 2001.

"Vickrey
Prices and Shortest Paths: What is an Edge Worth," by J. Hershberger
and S. Suri, FOCS
2001: 252-259.

"A BGP-based
Mechanism for Lowest-Cost Routing," by J. Feigenbaum, C.
Papadimitriou, R. Sami, and S. Shenker, PODC
2002: 173-182.

"How
Bad is Selfish Routing?" by T. Roughgarden and E. Tardos, JACM
49 (2): 236-259. 2002.

"Worst-Case
Equilibria," by E. Koutsoupias and C. Papadimitriou, STACS
1999: 404-413.

"Frugal
Path Mechanisms," by A. Archer and E. Tardos, SODA
2002: 991-999.

"Selfish
Routing," by T. Roughgarden, PhD thesis, Cornell University, May 2002.

"The
Price of Anarchy is Independent of the Network Topology," by T.
Roughgarden, Invited to special issue of JCSS. Conference version appears in
STOC 2002: 428--437.

"How
Unfair is Optimal Routing?" by T. Roughgarden, SODA
2002: 991-999.

**Multicast Cost Sharing:**

"Sharing the Cost of
Multicast Transmission," by J. Feigenbaum, C. Papadimitriou, and S.
Shenker, JCSS
63 (1): 21-41. 2001.

"Hardness Results
for Multicast Cost Sharing," by J. Feigenbaum, A. Krishnamurthy, R.
Sami, and S. Shenker, FSTTCS
2002: 133-144.

"Approximation and
Collusion in Multicast Cost Sharing," by A. Archer, J. Feigenbaum, A.
Krishnamurthy, R. Sami, and S. Shenker.

"Pricing
Multicasting in More Practical Network Models," by M. Adler and D.
Rubenstein, SODA
2002: 981-990.

"Applications
of Approximation to Cooperative Games," by K. Jain and V. Vazirani, STOC
2001: 364-372.

**Digital-Goods Auctions:**

"Competitive
Auctions," by A. Goldberg, J. Hartline, A. Karlin, and A. Wright.

"Competitive
Generalized Auctions," by A. Fiat, A. Goldberg, J. Hartline and A.
Karlin, STOC
2002: 72-81.

**Information Markets:**

"Extracting
collective probabilistic forecasts from web games," by D. Pennock,
S. Lawrence, F. Nielsen, and C. Giles, KDD
2001: 174-183.

"Computation
in a Distributed Information Market," by J. Feigenbaum, L. Fortnow, D.
Pennock, and R. Sami, NEC Laboratories America Technical Note 2002-L011N.

"The
Arbitrage Principle in Financial Economics," by H. Varian, J. Economic
Perspectives 1(2): 55-72. 1987.

"Parimutuel
Betting Markets as Information Aggregation Devices: Experimental Results,"
by C. Plott, J. Wit and W. Yang, Social Science Working Paper 986, CalTech.
1997.

"Wishes,
expectations, and actions: A survey on price formation in election stock markets," by R. Forsythe, T. Rietz, and T. Ross, J.
Economic Behavior & Organization 39(1): 83-110. 1999.

"Could Gambling Save
Science? Encouraging an Honest Consensus," by R. Hanson, Social
Epistemology 9 (1): 3-33. 1995.

"Combinatorial
Information Market Design," by R. Hanson, Information Systems
Frontiers 5 (1):105-117. 2003.

"Inducing
Liquidity In Thin Financial Markets Through Combined-Value Trading
Mechanisms," by P. Bossaerts, L. Fine, and J. Ledyard, Social Science
Working Paper 1095R, CalTech. 2000.

"Effect
of the Internet on Financial Markets," by H. Varian, 1998.

"Behavior of Trading Automata in a Computerized Double Auction
Markets," by J. Rust, J. Miller, and R. Palmer, In The
Double Auction Market: Institutions, Theories, and Evidence, 155-198. 1993.

"An
Artificial Stock Market," by R. Palmer, W. Arthur, J. Holland, and B.
LeBaron, Artificial Life and Robotics. 1998.

"Betting
Boolean-style: A Framework for Trading in Securities Based on Logical
Formulas," by L. Fortnow, J. Kilian, D. Pennock, and M. Wellman, NEC
Laboratories America Technical Report #2002-L010N. 2002.

"Compact
securities markets for Pareto optimal reallocation of risk," by D.
Pennock and M. Wellman, UAI
2000: 481-488. 2000.

"NP
Markets, or How to Get Everyone else to Solve Your Intractable Problems,"
by D. Pennock, Workshop on Economic Agents, Models, and Mechanisms at IJCAI
2001: 89-98. 2001.

"Modeling
Information Incorporation in Markets with Application to Detecting and
Explaining Events," by D. Pennock, S. Debnath, E. Glover, and C.
Giles, UAI 2002: 405-413.

"Information
Dissemination and Aggregation in Asset Markets with Simple Intelligent
Traders," by N. Chan, B. LeBaron, A. Lo, and T. Poggio, Technical
Report AIM-1646, MIT. 1998.

"Asset
Pricing Under Endogenous Expectations in an Artificial Stock Market,"
by W. Arthur, J. Holland, B. LeBaron, R. Palmer, and P. Talyer, 1996.

**Related Online Resources:**

Joan Feigenbaum's DIALM'02 Talk on Distributed Algorithmic Mechanism
Design.

Scott Shenker's DIMACS Talk on Foundations of Distributed
Mechanism Design.

Christos Papadimitriou's Tutorial on A TCS Introduction
to Game Theory and Mathematical Economics.

Yoav Shoham's talk on Combinatorial
Auctions.

Yoav Shoham's Survey of Auction
Types.

Yoav Shoham's talk on The
Auction Space: Beyond Zoology.

Yoav Shoham's talk on Elements
of Auction Theory.

Noam Nisan's talk on Rationality as a Paradigm
for Internet Computing.

The Spring
2002 rendition of CPSC455/555.

Noam Nisan's Course on CS, Game Theory, and
Economics.

David Parkes's Course on Computational
Mechanism Design.

Christos Papadimitriou's Course on Algorithmic
Aspects of Game Theory.

__Homepages__: (These web pages contain relevant talks and papers by the following
people and their collaborators.)

*******************************************************************************

**Basic Game-Theoretic Links**- Science
> Social Sciences > Economics > Game Theory (Google Web Directory)
- History of
Game Theory (Paul
Walker, Drexel)
- Evolution
and Game Theory (@holycross.edu)
**Societies****Various link farms**- Economic and Game Theory (David K. Levine, UCLA)
- Al Roth's game
theory and experimental economics page (Al Roth, Harvard)
**Conferences**- Theoretical Aspects of Rationality and
Knowledge
- LOFT 4
(30.06-02.07.2000,
Torino, Italy)
- ESSLLI Workshop
on Logic and Games (20-24.08.2001, Helsinki, Finland)
- Workshop on
Economics and Information Security (16-17.02.2002, Berkeley, CA, USA)
- ACM EC 2003 (9-12.06.2003, San Diego,
CA, USA)
**Game theory and Computer Science****Seminars and courses**- Topics on the border of
CS, Game theory, and Economics (Noam Nisan)
- Seminar on
Algorithmic Aspects of Game Theory (Christos Papadimitriou)
- Computational
Finance: Game and Information Theoretic Approach (Bud Mishra, NYU)
**Cryptography and game theory**- An Application of
Game-Theoretic Techniques to Cryptography (Michael Fischer, Rebecca
Wright, 1993)
- Repeated
games played by cryptographically sophisticated players (Olivier Gossner, 1999)
- Sharing a
long secret in a few public words (Olivier Gossner, 2000)
- A
Cryptographic Solution to a Game Theoretic Problem (Yevgeniy Dodis, Shaih
Halevi and Tal Rabin, Crypto 2000)
- Information
Security and Economics in Computer Networks: An Interdisciplinary Survey
and a Proposal of Integrated Optimization of Investment (Kanta Matsuura, CEF 2003)
**Economics Mechanisms in Computation****Research groups**- Economic and Game
Theoretic Mechanisms in Computation
- The Center for Computational
Game Theory (NYU)
**People**- Liad Blumrosen (Hebrew University)
- Joan Feigenbaum (Yale)
- Amy Greenwald (NYU)
- Daphne Koller (Stanford)
- Daniel Lehmann (Hebrew University)
- Nimrod Meggido (IBM Almaden)
- Bud Mishra (NYU)
- Noam Nisan (Hebrew University)
- Christos
Papadimitriou (Berkeley)
- David Parkes (Harvard)
- Amir Ronen (Stanford)
- Jeff S. Rosenschein (Hebrew University)
- Tuomas Sandholm (CMU)
- Yoav Shoham (Stanford)
- Vanessa Teague (Stanford) 23.01.04
- Moshe
Tennenholtz (Technion)
- Lyle Ungar (Pennsylvania)
- Michael Wellman (Michigan)
- Makoto Yokoo
(NTT)
**Implementation theory**[]**Courses**- A Crash Course in
Implementation Theory (Matthew O. Jackson)
**Overviews**- Implementation
Theory (Eric
Maskin, Tomas Sjöström, 2001)
- Implementation
Theory (Eric
Maskin, Tomas Sjöström, 2001 (slightly different?))
**People**- Kfir Eliaz (NYU)
- Tomas Sjöström (PennState Univ)

**Last Revised: March 1st 2004. http://www.cs.iit.edu/~xli.
xli@cs.iit.edu**