PRICING STRATEGIES

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PRICING STRATEGIES Powered By Docstoc
					    CS and ECON

      R AKESH VOHR A

   KELLOGG SCHOOL OF
      M ANAGEM ENT
NOR THWESTER N U NIVER SITY
Brief History of Interactions
   Brief History of Interactions


So, 5 minutes?
What is CS?
                     What is CS?
 Conception has changed over time


 Subjects once central have moved to the periphery, e.g.,
  Numerical Analysis

 Subjects once on the periphery are closer to the center, e.g.,
  statistics (data mining, clustering, classification, inference)

 Border is porus; Combinatorial Optimization, Graph Theory,
  Combinatorics, Logic

 Even with subfields there is enormous variance, e.g., AI.
What is ECON?
              What is ECON?
 Debate about it's definition, scope and label since
 inception.

 Whatley: Catallactics (Science of Exchange)


 Robbins :
`is the science which studies human behavior as a
  relationship between ends and scarce means which
  have alternative uses.'
           Obvious Similarities

 Vintage (Victorian)


 Employment of Mathematics (discrete vs.
 continuous)

 Imperial: each holds a perspective that is believed
 to have universal application
           John von Neuman

 Game Theory


 Duality theorem of linear programming.


 Cellular automata.


 Merge Sort algorithm (according to Knuth)


 Pseudorandom numbers
 Gaspard de Prony (1755-1839)

 Charged to produce log and trig tables
 to between 14 and 29 decimal places.

 Inspired by Adam Smith's analysis of
 division of labor
  Gaspard de Prony (1755-1839)

`I conceived all of a sudden the idea of
 applying the same method to the
 immense work with which I had been
 burdened, and to manufacture
 logarithms as one would manufacture
 pins'.
         de Prony’s Machine

Hierarchy of 3 levels

 Top:
Adrien Legendre and Lazare Carnot:
decided on the formulas to be used in
the calculations.
        de Prony’s Machine

 Middle: Given the mathematical formulas
 to be used, organized the computations and
 compiled the results ready for printing.

 Bottom: 60-80 unemployed hairdressers
 who performed the actual computations
 that required only addition and subtraction.
                Babbage

 On the Economy of Machinery and
 Manufactures (1835)

 Introduces notion of economies scale.


 Division of labor impacts not just
 output, but wages.
              Babbage


“The present volume may be considered
 as one of the consequences that have
 resulted from the Calculating-Engine,
 the construction of which I have been
 so long superintending.”
Algorithms
     Algorithms in Economics

Procedure, Process, Protocol,
 Tatonnement and Mechanism

 Proposal algorithm


 Top Trading Cycle Algorithm
     Algorithms in Economics

Ascending Auctions

 Fictitious Play


 Backward Induction


 Rationalizability
   Algorithm as Existence Proof

 Stable Matching and House Allocation


 Rationalizability of Preferences
     Algorithm as Mechanism

 Auctions


 Preference Aggregation - Consensus
 methods
  Algorithm as Model/Dynamic
 Hannan Theorem/Experts Theorem


 Approachability


 Reinforcement learning


 Search Models in Matching Markets


 Replicator Dynamics
Complexity
Complexity: Bounded Rationality
 Herbert Simon


 Bounded Depth Automata


 Incomplete Contracts


 Imitability


 Organizational Design (Babbage and de Prony!)
  Complexity: Communication

 Organizational Design


 Size of Message Spaces
     Complexity: Computation

 Hardness of Computing Equilibrium


 Hardness of Manipulation (voting,
 forecasting)

 MDP's


 Groebner basis
     Complexity: Description

 Kolmogorov-Entropy


 Strategies in Repeated Games
      Complexity: Learning

 VC dimension


 Vapnik-Chervonenkis
     Mediation, Trust & Privacy
 Reputation/Repetition


 Implementation without a mediator


 Multiparty computation


 Preference revelation


 Indirect vs. Direct mechanisms
           Epistemology

 Role of Knowledge in Games


 e-mail game, general's dilemma


 TARK
          Social Networks

 Formation


 Information Transmission


 Distribution of wealth, income

				
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