**Course:**

Network Economics

Professor Anna Nagurney

John F. Smith Memorial Professor

Isenberg School of Management

University of Massachusetts

Amherst, MA 01003

nagurney@gbfin.umass.edu

This course introduces and develops the concept of network economics as a powerful tool for decision-making today. It provides the foundations of networks both as an intuitive tool and graphical medium as well as a rigorous methodological one for the formulation, qualitative analysis, and computation of solutions to economic equilibrium problems. Hence, it considers both physical networks such as transportation networks, whose structure maps into nodes, links, and flows, and abstract networks, whose network mapping is not intuitively obvious.

The course traces the history of networks in the global economy and demonstrates how a variety of economic problems are concerned with flows over space and time where the flows may be of commodities, humans, money, and/or informational. It provides the basic theory of networks and overviews the fundamental theory of mathematical programming, specifically, optimization theory and variational inequality theory, to enable the formulation and solution of the network problems. The course also surveys effective computational algorithms which take advantage of the underlying network structure of the problems.

The course then describes specific applications which underly the network economy including traffic network and spatial price equilibrium problems. Other applications include: oligopolistic market equilibrium problems, migration equilibrium problems, financial equilibrium problems as well as knowledge and environmental networks. A variety of policy instruments, along with their ramifications are explored in these contexts. The course provides a solid introduction to the subject.

More advanced topics are subsequently studied which focus on network economics in today's Information Age. These include: multicriteria decision-making with applications to teleshopping and telecommuting as well as supply chain networks with electronic commerce.

This course is taught in lecture format with many
additional examples given in class as well as time for discussion. Textbook:
**Network
Economics: A Variational Inequality Approach**, 1999, revised and second
edition, Anna Nagurney, Kluwer Academic Publishers, Boston, Massachusetts.
The textbook, as well as additional reading materials, will be made available
to the students through the appropriate library. Professor Nagurney's new
book, **Supernetworks: Decision-Making for the Information Age**, 2002,
co-authored with June Dong, Edward Elgar Publishers, Cheltenham, England,
will also be made available for coverage of the advanced course topics.

OUTLINE OF LECTURES (Note that some of the background material will be interspersed throughout the lectures as needed by the specific applications.) Hence, below are topics that will be covered, but not necessarily in the order given. For example, much of the theoretical material in topics 2, 3, and 4 below will be incorporated into the subsequent topical lectures. Also, a topic may requre several class sessions for appropriate coverage of the material.

The formal lectures are posted on the web: http://supernet.som.umass.edu and can be downloaded from that site by scrolling to "Fulbright Lectures."

**LECTURE TOPICS**

**1. Introduction**

Overview of Network Economics, its History, and its Importance in Economics Today

Basics of Nonlinear Programming Theory

Basics of Network Theory

Basic Qualitative Theory

Relationship to Optimization Problems and Other Classical

Mathematical Programming Problems

Sensitivity Analysis

The General Iterative Scheme - Projection and Relaxation Methods

The Modified Projection Method

Decomposition Methods - Serial and Parallel

Introduction and History

The Standard Model

The Extended Model

Multimodal Models

The Elastic Demand Model

The Classical Model

Asymmetric and Multicommodity Models

Models with Policy Interventions

Relationship Between Traffic Network and Spatial Price Equilibrium

Nash Equilibrium

The Classical Model

Spatial Models

Relationship to Spatial Price Equilibrium

Overview of Environmental Issues and Policies

Spatial Oligopoly with Permits

Qualitative Properties

Conceptualization and History

Basic Models

The Costless Model

Model with Migration Costs

Model with Class Transformations

Walrasian Price Equilibrium

Network Equilibrium Equivalence

Sensitivity Analysis

Portfolio Optimization as a Network Flow Problem

Multi-Sector, Multi-Instrument Financial Equilibrium

Policy Interventions

Multicriteria Decision-Making on Networks

Equilibrium Concepts

Application to Teleshopping and Telecommuting Decision-Making

Extension of Multicriteria Decision-Making to Decision-Making Over Space and Over Time

Application to Telecomuting versus Commuting Decision-Making

Introduction to Supply Chains and Network AgentsThere will be homework assignments given regularly throughout the duration of the course as well as a project consisting of a paper. The students are expected to actively participate in the course through discussions. The paper should discuss an aspect of the network economy tied to globalization. Specifics of the grading of the course requirements will be finalized with the appropriate representatives from the University of Innsbruck.

Electronic Commerce: B2B and B2C

Network Equilibrium

Applications and Extensions