ECON 2190F – Topics in Economic Theory: Social and Economic Networks
Brown University
Spring 2013
Lecture: Wednesday 9-11:20am in 70 Waterman Street room 203
Instructor: Itay Fainmesser (email: Itay_Fainmesser@Brown.edu)
Office: Robinson 303D
Office hours: Tuesday 12-2pm
Course description
The motivation for the course can be described as follows. Social networks pervade our social and
economic lives. They play a central role in the transmission of information about job opportunities and
are critical to the trade of many goods and services. They are important in determining how diseases
spread, which products we buy, which languages we speak, how we vote, as well as whether or not we
decide to become criminals, how much education we obtain, and our likelihood of succeeding
professionally. The countless ways in which network structures affect our well-being make it critical to
understand how social network structures impact behavior, which network structures are likely to
emerge in a society, and why we organize ourselves as we do.
The course will begin with an overview of social and economic networks, and the embeddedness of
economic activity. We then will examine how to describe and measure networks as well as empirical
observations about network structure. Next, we will examine models of how networks form, including
random network models and strategic formation models. We will take a long look at models of how
networks impact behavior, including infection, diffusion, learning, peer influences, games played on
network, and networked markets.
Prerequisites
ECON 2010, 2030, 2050, and 2060.
While not a prerequisite, a strong background in Game Theory is a plus.
Readings
The text for the course is: Matthew O. Jackson (2008) Social and Economic Networks, Princeton
University Press.
The book will be supplemented by many additional readings as we proceed. In particular, the schedule
below includes a long list of relevant readings. Items marked with * will be discussed in class and are
required readings. The schedule and readings are tentative and will be modified throughout the
semester based on students’ interests and logistical constraints.
Assignments
Assignments in the class include:
 Short introspections of required papers.
 Problem sets.
 An in-class presentation of an assigned paper (For a guide to presenting a paper, see:
http://www.stanford.edu/~jacksonm/present.pdf).
 A research proposal and in-class presentation of research proposal.
The final project involves preparing a detailed research proposal concerning either the analysis of a
social or economic network, or a theoretical contribution. Given the semester horizon, you will not be
expected to produce a completed paper, but rather a proposal regarding the work that you would
conduct: basic motivation, approach, methods, and some preliminary analysis, and an outline of what
steps would be taken to complete the analysis. Thus, it should be well enough along to present the ideas
and approach, but not a finished piece of research. The project will be due on May 7 (submitted by
email) and should be no longer than 20 pages (double spaced with 1 inch margins and 12 point type
including all appendices, figures, and references). For a guide to writing a proposal, see:
http://www.stanford.edu/~jacksonm/nsfpost.pdf. You may work in groups on the final project, but with
no more than three people on a project.
Each student/group is required to prepare a 20-30 minute presentation motivating and previewing their
final paper. Presentation times will be assigned individually at the discretion of the instructor for a class
between April 17 and April 24. The date assigned is not negotiable, and changes will be considered only
based on a written letter from Dean David Targan. For a guide to presenting a paper, see:
http://www.stanford.edu/~jacksonm/present.pdf.
Grading
Late submissions of the problem sets or research proposal will be deducted 20% of the grade plus 10%
of the grade for any 24 hours beyond the first day that they are late. Exceptions will be considered only
based on a written letter from Dean David Targan.
Graded assignments will be returned at most seven days after the deadline or the date of the
assignment. Students then have at most eight days to introduce a complaint regarding a grade (that
means exactly two weeks after the deadline or the date of the assignment). Requests must be placed in
my mailbox in Robinson hall (room 103). I expect them to be specific and motivated. This means that
you must include a copy of the submitted assignment, and an explanation as to why the question(s)
need(s) to be regarded. If I find the request motivated, then I will re-grade these question(s) myself
(which may possibly result in a lower grade if I find it justified).
Schedule (tentative)
January 23: Introduction, representation and measurement, and empirical background.
 *Chapters 1-3.
January 30: Network formation.
 Chapters 6, 11.
 *Matthew Jackson and Asher Wolinsky ``A Strategic Model of Social and Economic Networks,''
Journal of Economic Theory, Vol. 71, No. 1, 1996, pp 44--74, reprinted in Networks and Groups:
Models of Strategic Formation, edited by Dutta and Jackson, Springer--Verlag, Heidelberg 2003.
http://ac.els-cdn.com/S0022053196901088/1-s2.0-S0022053196901088main.pdf?_tid=1d45e148-5945-11e2-94c500000aab0f6b&acdnat=1357616595_a74d53add37394b922482845792b4377
 *V. Bala and S. Goyal “A Noncooperative model of Network Formation,” Econometrica, Vol. 68,
No. 5, September, 2000. http://www5.atpages.jp/kera/up/log/114.pdf



Bramoullé, Yann and Kranton, Rachel “Public Goods in Networks”, Journal of Economic Theory,
July 2007, 135(1), pp. 478-494.
http://public.econ.duke.edu/~rek8/publicgoodsinnetworksbramoulle&krantonjet2007.pdf
*A. Galeotti and S. Goyal, “The Law of the Few,” The American Economic Review. 2010. (100)(4),
1468-1492. http://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.100.4.1468
James Lake, "Preferential Trade Agreements as Dynamic Farsighted Networks" (revise and
resubmit, Journal of International Economics) - [PDF]
February 6: Network formation.
 Chapters 4, 5.
February 13: Network formation
 *Student presentation (Hyunsup): Matthew Jackson and Brian Rogers “Meeting Strangers and
Friends of Friends: How Random are Social Networks?” (AER page), The American Economic
Review, 97(3), June 2007). – Chapter 3.2.3. in the book provides big picture context.
 Thomas Chaney, "The Network Structure of International Trade" American Economic Review,
revise and resubmit. [PDF] [Appendix] [older NBER WP16753] [older CEPR
DP8240] [Slides]

*Student presentation (Chenxi): Sergio Currarini, Matthew Jackson, and Paolo Pin ``An
Economic Model of Friendship: Homophily, Minorities and Segregation,'' Econometrica Vol. 77,
No. 4, 1003–1045, July 2009.
Some supplementary material is available and here is a link to related data.
February 20: Trust, cooperation, and repeated interactions
 Rachel Kranton, "Reciprocal Exchange: A Self-Sustaining System," AER, 1996.
 *Student presentation (Eric): Dean Karlan, Markus Mobius, Tanya Rosenblat and Adam Szeidl
“Trust and Social Collateral,” August 2009, Quarterly Journal of Economics.
 *Itay Fainmesser “Community Structure and Market Outcomes: A Repeated Games in Networks
Approach,” American Economic Journal: Microeconomics, 2012, 4 (1), 32-69.
February 27: Trust, cooperation, and repeated interactions
 *Itay Fainmesser “Intermediation and Exclusive Representation in Financial Networks” working
paper.
 Matthew Jackson, Tomas Rodriguez-Barraquer, and Xu Tan ``Social Capital and Social Quilts:
Network Patterns of Favor Exchange'' American Economic Review Vol. 102, Iss. 5, 1857--1897,
2012. There is also a supplementary appendix and related data.
 F. Nava and M. Piccione (2012) “Efficiency in Repeated Games with Uncertain Local Monitoring”
forthcoming in Theoretical Economics.
 *Student Presentation (John): Markus Mobius “Trading Favors,” working paper.
March 6: Trust, cooperation, and repeated interactions
 *Itay Fainmesser “Intermediation and Exclusive Representation in Financial Networks” working
paper.
 *Student Presentation (Maria): S. Nageeb Ali and David Miller “Enforcing Cooperation in
Networked Societies,” November 2012, working paper.
March 13: Network externalities
 Chapter 9
 Matthew Jackson and Yves Zenou, ``Games on Networks'', Forthcoming in the: Handbook of
Game Theory Vol. 4, edited by Peyton Young and Shmuel Zamir, Elsevier Science.
 Ballester, C., Calvó-Armengol, A. and Y. Zenou (2006), “Who's who in networks. Wanted: the key
player”, Econometrica, 74, 1403-1417.
http://users.eecs.northwestern.edu/~nickle/socNet/keyplayer.pdf
 Bramoullé, Yann and Kranton, Rachel “Public Goods in Networks”, Journal of Economic Theory,
July 2007, 135(1), pp. 478-494.
 *Student Presentation (Jeongbin): Bramoullé, Yann; Kranton, Rachel; D'Amours, Martin (2011),
Strategic Interaction and Networks
 *Student presentation (Neil): Network Games, 2010, joint with Andrea Galeotti, Sanjeev Goyal,
Matthew O. Jackson, and Fernando Vega-Redondo, The Review of Economic Studies, Volume
77(1), pages 218-244.
March 20: Pricing with network (Topics and group for final project due)
 Chapter 8.
 *O. Candogan, K. Bimpikis, A. Ozdaglar , “Optimal Pricing in Networks with Externalities”,
published in Operations Research, 2012.
 Fainmesser and Galeotti (WIP)
March 27: No class – spring break
April 3: Guest lecture---Markus Mobious---Learning in networks
 *Chapter 8
 *"Bayesian Learning in Social Networks," D. Acemoglu, M. Dahleh, I. Lobel and A. Ozdaglar,
Review of Economic Studies, vol. 78, no. 4, pp. 1201-1236, 2011.
 "Social Learning and Aggregate Network Uncertainty," I. Lobel and E. Sadler, working paper,
2012.
 “Naive Learning in Social Networks and the Wisdom of Crowds” Ben Golub and Matthew O.
Jackson), American Economic Journal: Microeconomics, 2(1):112-149, February 2010.

Benjamin Golub and Matthew Jackson ``How Homophily Affects the Speed of Learning and Best
Response Dynamics'', Quarterly Journal of Economics Vol. 127, Iss. 3, pp 1287--1338, 2012.
There is also an appendix.
April 10: Empirical and experimental studies.
 Student presentation (Mert): Gary Charness, Francesco Feri, Miguel Meléndez-Jiménez, and
Matthias Sutter, “An Experiment on Network Games” working paper.
 Student presentation (Sam): Jacob K. Goeree, Margaret A. McConnell, Tiffany Mitchell, Tracey
Tromp, and Leeat Yariv, “ The 1/d Law of Giving,” 2010, American Economic Journal:
Microeconomics, Volume 2(1), 183-203.
April 15: Students proposal presentations (6-8:15pm in Robinson hall room 301).
April 17: Students proposal presentations.
May 7: Paper proposals due.
Additional reading
Bargaining and trade in networks
 Chapter 10.3
 Margarida Corominas-Bosch, Journal of Economic Theory Volume 115, Issue 1, March 2004,
Pages 35–77. http://merlin.fae.ua.es/fvega/CourseNetworksAlicante/Art%EDculos%20del%20curso/Corominas-Bosch.pdf
 Mihai Manea, Bargaining in Stationary Networks, American Economic Review 2011.
Networks in labor markets
 Chapter 10.2.
 Toni Calvo-Armengol and Matthew Jackson, ``The Effects of Social Networks on Employment
and Inequality,'' American Economic Review, vol. 94, no. 3, 426-454, June 2004. Here are related
code and data.
 Itay Fainmesser, Social Networks and Unraveling in Labor Markets, Journal of Economic Theory,
forthcoming.