From Graph Theory to Models of Economic Networks . A Tutorial

Networks play an important role in a wide range of economic phenomena. Despite this fact, standard economic theory rarely considers economic networks explicitly in its analysis. However, a major innovation in economic theory has been the use of methods stemming from graph theory to describe and study social relations between economic agents in networks. This recent development has lead to a fast increase in theoretical research on economic networks. In this tutorial, we introduce the reader to some basic concepts used in a wide range of models of economic networks. We give applications for networks of information transmission, R&D collaborations and networks of company board directors. The modeling approaches presented or referred to include mathematical tools from graph theory, linear systems and matrix theory, stochastic processes as well as agent-based simulations.