Economics: The Application of Game Theory and Advertising Bidding Strategy in Internet and E-commerce Platforms

Course 6: Economics: The Application of Game Theory and Advertising Bidding Strategy in Internet and E-commerce Platforms

I. Course Description

With the increasing popularity of the Internet in the world and the development of e-commerce, modern consumer markets are becoming more and more digital. These markets are very different from the traditional markets studied in economics courses: some goods or services are offered at great discounts or even free. For example, news sites do not charge readers, or Facebook does not charge users to use the platform. However, the supply of some goods, such as movies, music, is limited. Currently, online retail is often dominated by a few large markets or platforms, such as Amazon, Ebay or Taobao. Consumers focus, shopping tendency and consumers private information are the core elements of the digital market.

This course aims to provide students with game theory in the context of digital economy and its practical application in advertising bidding and platform competition. Through the case analysis of the Internet and e-commerce platforms, students will deeply understand the following contents: 1) master the basic principles of game theory and its market application in digital economy; 2) explore the core mechanism in advertising bidding, such as the broad second price auction and VCG mechanism; 3) study the network effect, bilateral market, price discrete and product pricing strategies in the platform economy; 4) use the game theory tools to analyze the pricing and strategy of e-commerce platforms, advertising platforms and search engines; 5) cultivate the strategic thinking and decision-making ability in the field of digital economy through practical cases.

II. Professor Introduction

Alexei Parakhonyak – Tentenured Professor at Oxford University

Alexei Parakhonyak Is an associate professor at the Department of Economics and Lincoln College, Oxford University. Parakhonyak Research focuses on consumer behavior, industry organization, and all aspects of game theory. He has published several papers in top economics journals on topics including the consumer search market, pricing strategies, and the impact of competition on market outcomes. He is also actively involved in organizing conferences and seminars in this field and serves as a reviewer for several economics journals.

Professor Alexei Parakhonyak did his PhD in economics at Erasmus University and the Timbergen Institute. He has published numerous papers in top economics journals and presented his research at conferences around the world. Prior to joining Oxford, Parakhonyak held academic positions at the Higher School of Economics and the Erasmus University Rotterdam. He also won many awards for his research and teaching work, highlighting his contribution to the field of economics.

III. Syllabus

1. Game theory: Nash equilibrium, sub-game refined equilibrium
2. Oliopoly and discrete selection
3. Online platform: network effect, unilateral platform and bilateral platform
4. Sell your products on an online platform
5. Platform competition and platform compatibility
6. Internet price dispersion, price comparison website
7. Product versioning
8. Platform design, product diversity, and behavior-based pricing
9. Search engine: pay-per-click, search deviation diversion
10. Location auction: the broad second price auction and VCG mechanism