Another example that will recur in several settings throughout the book is the problem
of bidding in an auction. If a seller is trying to sell a single item using an auction, then the
success of any one bidder in the auction (whether she gets the item, and how much she pays)
depends not just on how she bids but on how everyone else bids as well — and so an optimal
bidding strategy should take this into account. Here too there are counter-intuitive effects at
work: for example, if the seller introduces more aggressive pricing rules into the auction, he
can make the strategic behavior of the bidders much more complex, and in particular induce
optimal bidding that offsets whatever gains he might have expected to make from the new
rules. We will find that auctions represent a basic kind of economic interaction that can be
1.2. CENTRAL THEMES AND TOPICS 11
Figure 1.9: In some settings, such as this map of Medieval trade routes, physical
networks constrain the patterns of interaction, giving certain participants
an intrinsic economic advantage based on their network position. (Image from
http://upload.wikimedia.org/wikipedia/commons/e/e1/Late Medieval Trade Routes.jpg.)
directly generalized to more complex patterns of interactions on networks.