Lecturers: Professor R.J. Anderson and Mr N.D.F. Bohm
No. of lectures: 8
Professional Practice and Ethics (Part IA) provides a
useful foundation for this course.
This course is a prerequisite for Security (Part II) and is desirable for the Part II courses Business Studies, and E-Commerce.
This course aims to give students an introduction to some basic
concepts in economics and law.
Game theory. The choice between cooperation and conflict.
Prisoners' Dilemma; Nash equilibrium; hawk-dove; iterated games;
evolution of strategies; application to biology and computer science.
Classical economics. Brief history of economics.
Definitions: preference, utility, choice and budget. Pareto
efficiency; the discriminating monopolist. Welfare and the Arrow
Classical economics continued. Supply and demand;
elasticity; utility; the marginalist revolution; competitive
equilibrium. Trade; monopoly rents; public goods; oligopoly. The
implications for innovation.
Asymmetric information. The market for lemons; adverse
selection; moral hazard; signalling; brands; transaction costs; theory
of the firm.
Auctions. English auctions; Dutch auctions; all-pay
auctions; Vickrey auctions. The winner's curse. The revenue
equivalence theorem. Mechanism design and the combinatorial
auction. Problems with real auctions. Applicability of auction
mechanisms in computer science.
Principles of law. Contract and tort; copyright and patent;
binding actions; liabilities and remedies; competition law; choice of
law and jurisdiction.
Law and the Internet. EU directives including distance
selling, electronic commerce, data protection, electronic signatures
and copyright; their UK implementation. UK laws, including RIP.
Network economics. Real and virtual networks, supply-side
versus demand-side scale economies, Metcalfe's law, the dominant firm
model, price discrimination. Regulatory and other public policy issues
of information goods and services markets.
At the end of the course students should have a basic appreciation of
economic and legal terminology and arguments. They should understand
some of the applications of economic models to systems engineering and
their interest to theoretical computer science. They should also
understand the main constraints that markets and legislation place on
firms dealing in information goods and services.
* Shapiro, C. & Varian, H. (1998). Information rules. Harvard Business School Press.
Varian, H. (1999). Intermediate microeconomics - a modern approach. Norton.