The objective of this course is to provide an introduction to a fast-growing new field of research, the economics of networks. At the end of the course, students should notably be familiar with elementary network notions, should understand the microeconomic and econometric foundations of linear models of peer effects in networks and should be able to compute Nash equilibria of a model of altruism in networks.
Course outline : The course is organized in four parts.
(1) An introduction to the field.
A new field of research. Reasons behind its emergence. Examples of networks. Overview of the field (2) Elementary network notions.
Adjacency matrix. Types of networks. Specific networks. Degree. Density. Walks. Paths. Cycles. Components. Shortest paths. Diameter. Clustering. Homophily.
(3) Peer effects in networks : theory and econometrics.
Sources of correlations between peers’ outcomes. Simultaneity and strategic interactions. Continuous outcomes and small interactions. Bonacich centrality. Large interactions and bounds. Binary outcomes. Econometric issues : identification, estimation.
(4) Altruism and informal transfer in networks.
Magnitude and motives behind informal transfers. The empirics of perfect insurance. Informal insurance in networks. Altruism in networks.