CS595: Economics and Computer Science

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.