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Economics and Law
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 the Part II courses Security, Business Studies and E-Commerce.
Aims
This course aims to give students an introduction to some basic concepts in economics and law.
Lectures
- 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
theorem.
- Classical economics continued. Supply and demand;
elasticity; utility; the marginalist revolution; competitive
equilibrium. Trade; monopoly rents; public goods; oligopoly. The
implications for innovation.
- Market failure. Asymmetric information: the market for
lemons; adverse selection; moral hazard; signalling; and brands.
Transaction costs and the theory of the firm. Behavioural economics:
bounded rationality, heuristics and biases.
- 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.
Objectives
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.
Recommended reading
* Shapiro, C. & Varian, H. (1998). Information rules. Harvard Business School Press.
Varian, H. (1999). Intermediate microeconomics - a modern approach. Norton.
Further reading:
Smith A. (1776). An inquiry into the nature and causes of the wealth of
nations, available at
http://www.econlib.org/LIBRARY/Smith/smWN.html
Poundstone, W. (1992). Prisoner's dilemma. Anchor Books.
Levitt, S.D. & Dubner, S.J. (2005). Freakonomics. Morrow.
Seabright, P. (2005). The company of strangers. Princeton.
Anderson, R. (2008). Security engineering (Chapter 7). Wiley.
Galbriath, J.K. (1991). A history of economics. Penguin.
Lessig L. (2005). Code and other laws of cyberspace v2, available at
http://www.lessig.org/




Next: Introduction to Security Up: Easter Term 2009: Part Previous: Complexity Theory Contents