Fundamentals of Network Analysis for Economics


Course Objective

After following this module, the student becomes familiar with the basic
principles behind individual/firm decision-making in market settings,
learns to evaluate market outcomes from an aggregate perspective
distinguishing between equity and efficiency, and is able to identify
market situations that lead to market failure as well as propose
sensible corrective measures.

Course Content

Ultimately, networks and network outcomes are the result of
individual/firm decision-making. This module takes the student to a tour
around the main microeconomics principles to understand individual/firm
behavior in economic environments and networked societies. It provides a
framework for evaluating the aggregate consequences of such
individual/firm decision-making. Finally, it identifies situations of
market failure where government intervention is desirable.

The following topics are discussed in the six lectures of the economics

Part 1 - Introduction to Transportation Networks: Demand and supply

1. Individual and aggregate demand, consumer surplus
2. Firm decision-making, cost-minimization (scale and scope economies),
producer surplus. The competitive equilibrium, efficiency
3. Market failure due to externalities; public policy; market power:
monopoly, price discrimination, contestability.

Part 2 - Theory of Firm Networks

4. Networks, Matrices and Linear Algebra
5. Strategic Substitutes vs. Strategic Complements
5.1 Networks with Strategic Substitutes and Public Goods
5.2 Networks with Strategic Complements, Binary and Coordination Games,
Linear Quadratic Payoffs, Welfare and Key Players
6. Applications: R&D Collaboration Networks, Cournot Competition in
Networked Markets, Coauthorship Networks, Team Production and Production

IMPORTANT: This module introduces students to the fundamentals of
network analysis from the perspectives of economics. It is required for
students with a background in either business or (econometrics and)
operations research, whereas students with a background in economics
should NOT attend this module.

Teaching Methods

The module will consist of six lectures and three tutorials. The topics
to be discussed during the lectures are listed above. After each lecture
instructors will distribute practice material. Students have to work
through this practice material. Every other week there will be a
tutorial session to discuss and correct the exercises.

Method of Assessment

Written final exam (75%), practice material (25%)

Entry Requirements

Entry into minor


• Michael R. Baye: "Managerial Economics and Business Strategy", Mc-Graw
• Bramoulle, Yann, Andrea Galeotti, and Brian Rogers. “The Oxford
Handbook of the Economics of Networks”, Oxford University Press, 2016.
• Chih-Sheng Hsie, Michael D. König and Xiaodong Liu, “Networks in
Economics: Theory, Econometrics and Policy Implications”, To Appear in
Elsevier and North Holland, Economics and Econometrics Series,
Pre-Publication Draft.
• Lecture notes.

General Information

Course Code E_EBE3_FEC
Credits 6 EC
Period P1
Course Level 300
Language of Tuition English
Faculty School of Business and Economics
Course Coordinator M.D. Konig
Examiner M.D. Konig
Teaching Staff

Practical Information

You cannot register for this course yourself; your faculty's education office carries out registration

Last-minute registration is available for this course.

Teaching Methods Lecture, Study Group
Target audiences

This course is also available as: