NeTS: Large: Networked Markets: Theory and Applications

California Institute Of Technology, Pasadena CA

Investigators

Abstract

From the internet to the electricity grid to the interconnections of banks, networks are a pervasive feature of our world today. Their ubiquity has had a fundamental impact on modern markets. Driven by advances in information technology, modern marketplaces are becoming ever more dynamic, complex, and interconnected. While markets used to be slow to evolve, have simple institutions governing trade, and make finding the "right" trading partner a daunting challenge; markets emerging today are typically complex platforms, with a range of dynamic mechanisms for facilitating matches amongst participants. This gives an unprecedented level of control over the design and operation of markets, which has led to their incorporation as increasingly crucial components of networked systems, e.g., dynamic real time pricing in cloud computing markets and automated trading in financial markets. The changes in markets have also fundamentally impacted information technology, especially in the context of networked systems -- it is increasingly the case that networked systems that used to be purely "engineered" are now being governed by a mixture of markets and engineering, e.g., electricity markets are managed through a combination of multiple markets at different timescales (day ahead, real-time, etc.) and fast-time scale control systems to ensure stability. Thus, networks and markets are connected today more than ever, and so it is necessary to study them as a unified whole rather than as individual fields. In particular, the incorporation of markets into networked systems creates an unavoidable interaction between "the engineer" and "the economist" in terms of which aspects of the system are managed via control policies, protocols, etc., which aspects are managed via economic tools such as pricing, market design, etc., and how the two interact. This is made even more challenging by the fact that engineering choices have consequences for economic efficiency and vice versa. The researchers in this grant seeks to develop theoretical foundations for the study of networked markets, and will focus on three general themes: (i) the impact of connections between markets, (ii) the impact of connections between participants of markets, and (iii) understanding and controlling contagion in networked markets. These themes cut across many of the challenges and opportunities surrounding networked markets, and a better understanding of these issues is crucial for each of the five target applications on which the research focuses: cloud computing markets, data markets, electricity markets, matching markets (e.g. labor markets), and financial markets. In particular, the results of the research in this grant will provide new insights into the functioning of networked markets that can provide benefits for both market operators/designers and market participants. The research is highly interdisciplinary, connecting computer science and economics and focusing on applications from diverse areas in both engineered and social systems. As part of the grant, the investigators are initiating a new PhD program on Computing and Mathematical Sciences at Caltech, which focuses training students with cross-cutting interdisciplinary interests at the interface of computing with science and engineering. Additional outreach activities include yearly workshops with both academic and industrial attendance. Further, the strong industry connections of the investigators in each of the application areas highlight the potential for the proposed research to make the transition from academia to practice.