Ending in 2002, the lengthy anti-trust case against Microsoft illuminated current economic theories on imperfect competition and transaction costs, which involve game theory to analyze the behavior of companies. In classical economics, companies operating in a perfectly competitive environment have no influence over the price, which is determined entirely by market factors. Most industries are not perfectly competitive though, and many companies can affect the market price to at least some degree. This is where game theory comes in.

The game theory model of transaction cost economics is a game of chicken, where neither player wants to yield to the other and the worst possible outcome for both players is to not yield. It is similar to a prisoner’s dilemma because it both players are tempted to deviate from the Nash equilibrium of both yielding, resulting in a non-Pareto optimal equilibrium. On the other hand, this type of game is the opposite of a coordination game because it is not mutually beneficial to play the same strategy. Instead of working together as in a coordination game, the players are rivals, trying to make the other player to yield to maximize their payoff. This chicken game can be used to analyze the bargaining costs involved between all suppliers and customers in a given economy. In the framework of this course, the buyers and sellers can be viewed as nodes, while the transactions can be viewed as the edges that connect these nodes. Contracts are often drawn up to formalize these relationships between buyers and sellers.

In many cases, corporations, such as Microsoft, are able to take advantage of certain conditions and use strategies, such as exclusivity contract clauses, to create a monopolistic environment that hinders competition and hurts consumers. This economy theory on imperfect competition spurred the Clinton administration to pursue anti-trust cases against major corporations such as Microsoft. Some economists are opposed to what they see as an overzealous movement to prosecute anti-trust cases, though. Ron Joskow of M.I.T asserts that such a policy “is likely to lead to poor legal rules and remedies.” Economist Ronald Coase pioneered the field of transaction cost economics, suggesting that companies exist in order to reduce transition costs. He explains how companies can often reduce transaction costs and improve efficiency by having all the transactions performed by the same group. Through vertical integration, a company can many times limit some of the bargaining costs and negative externalities associated with the transactional game of chicken.

Joskow concedes that anti-trust proponents are correct about the harm of imperfect competition in certain situations. But he also warns of the dangers of a wide-ranging anti-trust policy. “This approach reflects the inaccurate assumption that organizational design does not matter for economic performance and that restructuring complex firms is a ‘piece of cake’ without the need for careful analysis or any significant economic consequences.”

http://query.nytimes.com/gst/fullpage.html?res=9F01E7DA143FF933A15755C0A9649C8B63&sec=&spon=&pagewanted=all

Text Generation Gap: U R 2 Old (JK)

http://www.nytimes.com/2008/03/09/business/09cell.html?em&ex=1205467200&en=7aa742796c9cb596&ei=5087%0A

New York Times

By Laura A. Holson

March 9, 2008 

Parents across the nation are becoming increasingly isolated from their children through text messaging. It is becoming more popular for children to send single lines of text dialogue to their parents rather then answering the phone to take their call. Additionally texting at the family dinner table and during family activities has become quite common place in the American home. While some parents have tried to adopt texting into their parent-child relationship, they are still facing a language barrier. Texting with its own dialect and formalities is another challenge for non-tech savvy parents to overcome. 

While in many cases the addition of new paths of communication has resulted in expanding the social network, texting has become a social phenomenon which removes people from their immediate social network. The social ramifications of introducing a new form of technology are nearly impossible to predict. Similar to the affects of adding new roadways to traffic patterns, text messaging has created an unforeseen jam in the family circle. Perhaps once the art and technology of texting is fully adopted by older generations then it will prove to enhance the channels of communication within the family network.

It’s easy to see the effect of the boom of social networking sites on high school and college culture however their effect and use by the older affluent users often goes less noticed. These sites such as Myspace, Facebook, Digg, and Youtube have become the cool thing too do in the younger culture, but what value do they hold to an older generation of businessmen.

Networking is a key to business and being able to interact quickly and efficiently with others is priceless. Previously face-to-face meetings were the main and only acceptable practice of real customer communication, but now with the growing age of increasingly tech savvy users, online interactions are becoming more and more common. These interactions provide a much quicker alternative to personal meetings for the already time pressed businessmen. Additionally with such a large younger audience as members of these social networks (Those age 18-44 50% visit social networking sites) these wealthy individuals are just going to where their potential customers already are. As a result when surveyed 24% of wealthy adults are joining social networking sites, such as facebook, that are aimed a much younger audience. A majority of these individuals, 69%, even continually maintain their site profiles.

Blogs, a different social driven online media, are another commonly frequented area by the wealthy. Blogs are a convenient way to get opinions, articles, summaries, in a condensed form. Specifically blogs could contain financial tips, world news, and other political information; Information in blog form can be digested quickly, something important for people who’s time is generally quite valuable. 90% of the wealthy say they get information online about finance and investing, a large portion of this from blogs. 72% of the wealthy internet users said they read blogs; even more prevalent than the 69% aged 18-44. These users are not just observers of the blogs either; many leave comments on a weekly or even daily basis.

While some of these affluent users found these sites after they became rich and others used these sites to help them reach where they are today, all benefited by becoming more efficient and connected in their everyday lives. Some people say you can learn from those that have already achieved success, if you believe so this may not be a bad place to start.

Sources:

http://www.foxbusiness.com/markets/industries/media/article/wealthy-people-tap-social-networking-sites-comment-blogs_516250_15.html

In this article scientist discuss what they believe to be the origin of the

AIDS virus in United States. Using a kind of genetic molecular analysis on

blood samples from early aids victims in contrast with the blood from

current Aids victims scientists were able to create a map of the spread of

the Aids virus. There analysis has led them to the conclusion that the Aids

virus first entered the US in the city of Miami. They believe it came to

Miami from the country of Haiti by way of immigrant. Due to the nature of

the Aids virus, where a carrier can be unaware of its presence for years,

and the fact that early on so little was known about the disease, it spread

rampantly in the beginning quickly infecting hundreds and then thousands as

it spread across the US and the world. Aids is now said to have originated

in Africa in the 1930s, it made its way to Haiti by 1966 by way of

immigration, and then finally to the US and Miami by 1969.

The true networks aspect of this article really comes into play with the

diseases spread within the US where it has been most studied and documented.

At its most basic level the spread of an idea fad or information is similar

to that of a biological disease. With the difference being that one is

spread through conversation or written word, and the other is spread through

fluid exchange. Both follow the same basic principal of expansion. It is

said that it was a mere one Haitian immigrant that brought Aids to the US

and left unchecked it spread aggressively, vastly increasing its numbers in

a short time until the knowledge of its existence, and ideas on preventing

its spread came into practice. The single Haitian acted as a gatekeeper for

the disease in the US.  It was his initial connections that led to the

rampant spread of the disease on a much greater level. This scenario also

demonstrates how our greatly increased ability to travel and spread

information has also resulted in our increased capability to spread disease.

In a time where intercontinental travel was not as common, it is likely that

the level of spread of Aids would not have as large.

http://www.msnbc.msn.com/id/21534118/

Botnets are a slightly different type of network than what we are usually familiar with. A botnet is a large group of computers (commonly known as ‘zombies’) that are networked together by somewhat of an evil overlord. That is, the computers and their users are unaware of being a part of this network, but were maliciously forced into it by the person in control of the botnet. They are usually controlled by, and the zombies connect to, an IRCD (Internet Relay Chat Daemon).

All of the nodes of this network share a few things in common. To begin, it is almost certain that they are being controlled unbeknownst to their users. Second, they all are running a piece of malicious software, a bot if you will, that is allowing the “master” to control them. They are all linked to one another, and in a large portion of cases are used against their will to carry out some type of attack as a single unit. This attack could include, but is not limited to: DDoS(Distributed Denial of Service), Spamming, Sniffing, Keylogging, Spreading themselves(worm), Advertisements, manipulation of polls, and in some cases large-scale identity theft.

The article I link below is discussing an interesting clashing between the botnet world and a social network. In this case, the internet social protest group going by the name of Anonymous utilized a special fusion of botnets to attack the church of scientology’s websites and shut them down. It was in response to Scientology requesting YouTube take a leaked video of a Scientology interview with Tom Cruise down for copyright infringement. The group Anonymous, having nothing but malicious intent for Scientology, gathered on an irc server and launched several attacks against Scientology. These attacks included a large Botnet DDoS attack successfully taking the Scientology homepage offline for several hours. This attack was run by fusing the botnets that several members of the Anonymous group had obtained illegally with 100s of Anonymous members’ computers as well. In this case, a large portion of the zombies on the network were aware of their computer’s participation in the botnet, and were allowing it to be controlled in order to achieve a common goal. This shows how the strength of social networks, and a cause/hope for change can create a botnet through social networking. At the same time worldwide peaceful protests were being held by members of Anonymous, as well as phone line attacks and blackfaxing of Scientology’s fax-machines. What started as an online protest group had evolved into several interesting networks of individuals, scarcely organized which also created more networks, such as the botnet[s] that they created for the attack.

http://www.scmagazineus.com/DDoS-hack-attack-targets-Church-of-Scientology/article/104588/

On February 15th Stephen J. Dubner posted an interesting compilation of opinions regarding the net effect of the technological boom of social networking on his the Freakonomics NY Times blog.  He asked a variety of renowned experts on social networking and technology through their latest studies at some of the leading universities in the United States and some leading technology companies such as Apple.  The question posed to the different perspectives was: “Has social networking technology (blog-friendly phones, Facebook, Twitter, etc.) made us better or worse off as a society, either from an economic, psychological, or sociological perspective?”  Stephen J. Dubner and Steven D. Levitt created the Freakonomics blog after publishing their best-seller book that explored the hidden side of everything through an economics lens.  In this specific blog post, Dubner asks Martin Baily, Danah Boyd, Steve Chazin, Judith Donath, Nicole Ellison, and William Reader regarding how the social networking technology has changed our society in different aspects.

Their different perspectives were mostly positive and related greatly to the ideas discussed in the beginning of the course with nodes and bridges.  It is still too early to really evaluate how the new technologies and new social networking tools affect large populations.  However, these leading research experts have noted the positive benefits of people being more connected with such ease.  The idea of social capital is brought up and how it is increasing tremendously with the social networking websites.  Social capital increasing is exemplified when students starting at a new university have already pre-made acquaintances because of the social networking websites.  Also, sites such as Doostang and other social networking job search tools have helped people find careers outside of their specific personal face to face connections.  Furthermore, the blog post talks about the idea of homophily and how people tend to be surrounded by people that have the same interests.  William Reader, a social networking site researcher from Sheffield Hallam University,  states that social networking websites will never really replace face-to-face communication because it lacks the genuine contact needed for real friendship.  Overall, the leading social networking experts say that the new websites and technologies are definitely changing societies, but the value of the change really depends on what one values in their relationships and connections to others in their society.

Source: http://freakonomics.blogs.nytimes.com/2008/02/15/is-myspace-good-for-society-a-freakonomics-quorum/

http://www.allacademic.com/one/prol/prol01/index.php?cmd=prol01_search&offset=0&limit=5&multi_search_search_mode=publication&multi_search_publication_fulltext_mod=fulltext&textfield_submit=true&search_module=multi_search&search=Search&search_field=title_idx&fulltext_search=Cantankerous+Cooperation%3A+Democracies%2C+Authoritarian+Regimes+and+the+Prisoners+Dilemma

The results of the political bargaining process play a great role in decisions concerning foreign policy. Therefore, game theory lies at the heart of Democratic Peace Theory, which stipulates that democratic states seldom go to war against one another. This theory is strongly supported by observed evidence and data and has been extensively discussed; however, this theory is weak for it is still uncertain whether these observed trends in international relations legitimately signify more cooperative relations between democracies. For that reason, the research article titled Cantankerous Cooperation: Democracies, Authoritarian Regimes, and the Prisoners Dilemma (URL provided above) seeks to study the Democratic Peace Theory in more depth. The research study in the article was conducted, mainly, to examine whether decision-making groups are, in fact, more cooperative when operating democratically.

Self-serving nations often act according to dominant strategies that may lessen the welfare of the group. For example, a country’s dominant strategy may be to obtain weaponry because increasing its own security is its best choice in response to whatever the other countries choose to do. However, due to the overall decrease in security, the group’s welfare decreases when that one country obtains more weapons. This arrangement mimics the Prisoners Dilemma Game; the research conducted in this article, therefore, uses the structure of the Prisoners Dilemma Game to model the interaction of varying regime types. The two types of regimes examined in the study are democratic and authoritarian, for these are the most widespread forms of government in the world today. Each player can choose to cooperate or defect with the opposing player, making its decision either in a democratic or authoritarian way.

The research study used computer simulation and mathematical models to analyze the decisions and to predict the outcomes of the two agents, one representing a democracy and the other an authoritarian regime. The decisions of each agent were influenced, but not decided, by their own unique tendency towards cooperation as determined by the set-up of the experiment. As in Game Theory, the players in the simulation are rewarded a payoff after each round in accordance to the payoff matrix. After each round of play, the agents choose their strategy for the next round of play; they choose this strategy in accordance to the perceived success or failure of the strategy previously chosen. The assessments of each round, the payoffs, and the predispositions of each player were represented numerically throughout the experiment, as detailed in the article.

The results found by the experiment support the Democratic Peace Theory and the researchers’ hypotheses prior to the experiment, which were in accordance with the theory. The results provide evidence that noteworthy differences do, in fact, exist in the patterns of cooperation between democratic and authoritarian regimes. The most cooperative combination was between two democracies, and the least cooperative combination was between two authoritarian regimes; democratic regimes, however, are just as prone to discord as authoritarian regimes when opposite a non-democratic regime.

 Many logical explanations support this result. Firstly, the decisions made by a democratic group are controlled by domestic interest groups. In contrast, in an authoritarian regime, the authoritarian leader makes the decision on behalf of the group while handling far fewer pressures. As a result, authoritarian states can more easily institute grand, unexpected changes in policy, often taking the form of impulsive defections. Similarly, due to recurring public debate, which is so fundamental to the operation of a democratic state, the information that is relayed to other states is more clear and dependable. Therefore, the relations between democratic and non-democratic states are plagues with suspicion and an reluctance to compromise, resulting in chronic conflict.

The study of networks has grown substantially in the last decade or so. Mathematicians, sociologists, and scientists from various disciplines have found new ways in which network theory can be applied to an existing situation. An interesting article by Patrick Radden Keefe of the NY Times examines the role that network theory may play in uncovering terrorists. Much of the techniques and terminology he uses has been touched upon by Professor Kleinberg towards the beginning of the semester when we were discussing network theory. To reiterate, in its basic form, network theory represents discrete objects (in this case, people) and the relationships shared between them in the form of nodes and edges.

In wake of the September 11th attacks, network theory has been more extensively applied in an attempt to uncover elusive terror cells. One social network consultant found that all 19 hijackers were connected to one another by only a few links, with the majority of them converging on the leader, Mohamed Atta. There are several government programs utilizing network theory as well. In 2002, the controversial Total Information Awareness program as launched in an effort to search through large volumes of data for hidden connections. Another project called Able Danger by the US Army aimed to create a graph of Al Qaeda by “identifying linkages and patterns in large volumes of data”.

The US government has a treasure trove of information, courtesy of the NSA’s (National Security Agency) communication interception abilities. With somewhere around 650 million communications a day, the question of who to listen to first becomes an issue. One technique used is to begin with a suspect and progress outward in a “spider-web”, or in other words, a breadth-first search. The problem with this approach is that, a typical person is connected by two degrees of separation to thousands of people, and to hundreds of thousands of people by three degrees. Also, the National Counterterrorism Center lists about 325,000 names of suspected terrorists. Hence, even this technique is prone to providing the NSA with an overload of information, as well as many false positives.

Before wiretapping or any sort of comprehensive surveillance is attempted, the NSA looks through metadata, which are records of who is contacting whom via phone or email. This simplification of data allows NSA analysts to search for network hubs, or nodes with exponentially more links than average. Algorithms have been developed to determine the “role structure” in a network, establishing any logistical and hierarchical relationships. The strength of weak ties are also taken into account, in that the most valuable information may be exchanged between nodes whose respective networks have no other common connections. Another approach suggested by Duncan Watts of Columbia University is using affiliation networks. These are networks consisting of people joined together by a common activity. Certain signature behaviors could be searched for in order to track terrorists. One example given is to look for Muslim militants who play paintball. This technique - looking for certain activities or behaviors - is similar to those used to catch credit card fraud. It is not certain of how well this will work in finding terror networks, since there is not as many reliable patterns and behaviors for terror networks as there are in say, credit card fraud.

Sources:

http://www.nytimes.com/2006/03/12/magazine/312wwln_essay.html

Professor Easley’s lecture on online advertisements can be closely related to the New York Times article “Where Every Ad Knows Your Name” by Louise Story: link

Many big Internet companies, such as AOL, Yahoo, Microsoft, and Google, are expanding into the advertisements business. Since these companies collect a ton of information on users, a thought to ponder is whether these companies can post targeted advertisements with your name in it. This issue raises concerns about privacy, and whether these companies should offer ads with your name in it, regardless of whether than can do it.

Both AOL and Yahoo say they could use a full name, but only for ads posted on sites they own; they not pass information like names to outside advertisers. However, AOL has no plans to offer “name-ads,” while Yahoo is open to the idea where they can customize ads based on users’ registration information.

On the other hand, Microsoft is against using personal information in ads and does not trace data back to an individual user. However, Microsoft does not consider first names to be personal information, so they can only use a user’s first name in an ad.

Google may have the technology to use names in ads, but it is different in that it does not collect data based on demography. Instead, Google only shows ads based on website you are currently looking at. However, Google has its own way to collect personal information on users. For example, users enter their names in Gmail, their addresses in Google Maps, and their credit card information through Google Checkout.

The way Google targets ads by only showing ads relevant to your current search (keyword-based ads) is very closely related to the concepts from Professor Easley’s lecture. Using this method, Google runs generalized Second Price Auctions to determine the price of ads. The pricing is determined using a pay-per-click method, where Google charges advertisers based on how many clicks their ads gets.

For these companies as well as other big Internet companies, the question remains how far should they go in using personal information to target ads in their expanding advertising networks.

Ryan Thomas’ dissertation talks about the advantages of implementing a cognitive network. Unlike many of the networks and game theory methods discussed in class this network runs on the notion of what is best for all parties involve instead or being centralized on each individual node in the network. The concept of learn and rationalizing about what each decisions impact would have on the network as a whole strips away Nash Equibrilums (NE) and brings to light the optimal situation for the system. Ryan Thomas splits cognitive networks that require selfish strategies into two classes saying,

“The first class we identify is the potential class, which assures the convergence of the network to NE that are local-optima for network objectives. The second class we identify is the quasi-concave class, which assures the convergence of the network to a Pareto Optimal Nash Equilibrium (PONE) that is both a network and cognitive element optima.” [p. 59]

He goes on to state that when constructing a cognitive network one must factor the three critical design decisions (price of selfishness, ignorance and control) that will ultimately affect the performance.

The layout provided by Thomas and his colleagues gives a foundation for combating the problems brought about by the increase in file size and bandwidth-intensive applications that many users have become accustom to. With the rise of file sharing and online software, it has become important to keep people better connected with their data. Cognitive networks will give intelligence to networks, causing the most basic tasks of packet routing to the most complex the ability to utilize the network while not crippling another process from essential resources.

Link:

Ryan Thomas’ Dissertation