COURSE NUMBER: MBA217.1
COURSE TITLE: The Economics of Social and Other Networks
UNITS OF CREDIT: 3 units
INSTRUCTORS: Nicholas Economides
E-MAIL ADDRESSES: economides@stern.nyu.edu
MEETING DAY/TIME: Monday/Wednesday, 2:00-3:30pm
PREREQUISITE(S): MBA 201A
CLASS FORMAT Lectures and class discussion
REQUIRED READINGS Instructor Notes, readings on line, readings on
reserve, texts
BASIS FOR FINAL GRADE midterm, paper/project, class participation
ABSTRACT OF COURSE'S CONTENT AND OBJECTIVES:
This course analyzes the economics of social networks, such as
Facebook and Twitter as well as other networks, such as the Internet, the
telecommunications network, cable TV networks, banking networks, and credit
card networks. We develop a general theory of platform competition, where the
platform may be an operating system such as the iOS,
Android, or Windows or a network such as Facebook. We examine how networks are
formed from the perspective/incentives of users, the network (platform)
operator, and the applications providers that are complementary to the network.
We identify key features of networks including: (i)
higher value to users from networks of larger size; (ii) very significant
inequalities in market share, profits, and (often) prices; (iii) the extent of
incentives for interoperability and interconnection between networks; and (iv) importance of key network nodes that are “central” or
“influential” in the creation and stability of networks.
We discuss two-sided markets, where two sides/parties wish to
interact, and their interactions must go through an
intermediary/platform/network. Examples:
• Two sides: advertisers and readers. Intermediary: periodical,
Yellow Pages, Internet search engine.
•Two sides: Internet message sender and receiver. Intermediary:
Internet Service Provider(s).
•Two sides: consumers and merchants. Intermediary: payment network
(e.g., Visa, MasterCard, American Express).
•Two sides: gamers and game designers. Intermediary: game-console
manufacturer.
We observe that sometimes both sides pay (game-console
manufacturers charge both gamers and game designers), sometimes there is a zero
price to one side (Google doesn’t charge consumers but charges advertisers) and
sometimes one side is subsidized (credit-card companies charge merchants, but
often subsidize consumers with cash and bonus points or miles). We explain why
charges vary across the types of examples above, and apply it to the current
controversial issue the abolition of “network neutrality,” if telephone and
cable companies are allowed to impose additional charges to originators of
content on the Internet.
We will discuss network platforms of importance including (i) mobile “smart” phones such as iPhone and Android ones;
(ii) audio and video distribution networks; (iii) digital books distribution
networks; (iv) the PC operating systems market; and (v) the payments systems
networks (credit cards) platforms. We will also discuss in detail the structure
of the Internet, the Internet search and advertising markets/platforms and
network neutrality.
BIOGRAPHICAL SKETCH: NICHOLAS ECONOMIDES is a Professor of Economics
at the Stern School of Business of New York University, visiting professor at
the Haas School of Business of UC Berkeley and Founder and Executive Director
of the NET Institute, http://www.NETinst.org. He is an internationally
recognized academic authority on network economics, antitrust, and public
policy. His fields of specialization and research include antitrust, the
economics of networks, telecommunications and the Internet, computers, and
information, the economics of technical compatibility and standardization,
industrial organization, the structure and organization of financial markets
and payment systems, application of public policy to network industries,
strategic analysis of markets, security and privacy, and law and economics. He
has published over one hundred articles in top academic journals in the areas
of networks, telecommunications, oligopoly, antitrust, product positioning, and
on liquidity and the organization of financial markets and exchanges. He holds
a Ph.D. and a M.A. in Economics from the University of California at Berkeley,
as well as a B.Sc. (First Class Honors) in Mathematical Economics from the
London School of Economics. He has previously taught at Columbia University and
Stanford University. He has advised or is currently advising the U.S. Federal
Trade Commission, the governments of Canada, Greece, Ireland, New Zealand, and
Portugal, the Attorneys General of New York and Texas, major telecommunications
and high technology companies, a number of the Federal Reserve Banks, the Bank
of Greece, and major Financial Exchanges. He serves on the Advisory Board of
the Economist Intelligence Unit and Quadriserv. The
complete C.V. of Prof. Nicholas Economides is available at http://www.stern.nyu.edu/networks/cvnoref.html.