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Emerging Areas

Modeling New Markets

With the Internet, completely new forms of markets are rapidly evolving. Modeling these with the purpose of making tools for making decisions in these markets is an active field of research, involving economists as well as computer scientists. While deployment to Danish industry may not be ready for all the emergent areas at this point, we plan to pursue such deployment during the duration of the project and seek out partners of deployment in the industrial forum.

In the meantime, we will also intensify research  on the theoretical aspects of these topics. Here, we plan to draw from the significant experience of our international academic partners, in particular our partners at Northwestern. Important examples of such emergent areas include:

  • Computational advertising. Researchers at Yahoo! have coined this phrase for the computational challenge of finding the best ad to present to a user engaged in a given context, such as querying a search engine or reading a web page. Computational advertising combines expertises from Algorithms, Operations Research and Microeconomics, making it an obvious candidate for a future focus area for us. Also, an area of increasing importance is marketing and advertising in social networks and other Web 2.0 applications. We plan extended research visits from our partners from Northwestern and expect further investigation in this area to be a central activity.
  • Design and analysis of distributed content distribution system (such as P2P file sharing systems). Current theoretical research model such systems as games or markets and do equilibrium analysis. It can be expected that such models can be used to choose between different designs of such systems and tune the parameters of a particular design.
  • Information and prediction markets. These markets use constructed lotteries to aggregate the collective expectations about future events. A prime example is the so-called political markets on Iowa Electronic Market. Here, the players are not paid to tell what they vote themselves but rather what they think others will vote, an approach that has outperformed the final Gallup polls. Other commercial examples are "box office" prediction at Hollywood Stock Exchange or Idea Exchange by the Danish Company Nosco.  These information markets origin from the field of Experimental Economics, where economics questions are studied using various experimental methods. A likely emerging area in this field is commercial economic laboratory studies. With partner DONG, we intend to investigate the usage of such experiments to optimize the energy network design and tariff structures.