We have now seen a number of ways of thinking both about network structure and about the behavior of agents as they interact with each other. A few of our examples have brought these together directly – such as the issue of traffic in a network, including Braess's Paradox – and in the next few chapters we explore this convergence of network structure and strategic interaction more fully, and in a range of different settings.

First, we think about markets as a prime example of network-structured interaction between many agents. When we consider markets creating opportunities for interaction among buyers and sellers, there is an implicit network that encodes the access between these buyers and sellers. In fact, there are a number of ways of using networks to model interactions among market participants, and we will discuss several of these models. Later, in Chapter 12 on network exchange theory, we will discuss how market-style interactions become a metaphor for the broad notion of social exchange, in which the social dynamics within a group can be modeled by the power imbalances of the interactions within the group's social network.

Bipartite Graphs and Perfect Matchings

Matching markets form the first class of models we consider, as the focus of the current chapter. Matching markets have a long history of study in economics, operations research, and other areas because they embody, in a very clean and stylized way, a number of basic principles: the way in which people may have different preferences for different kinds of goods, the way in which prices can decentralize the allocation of goods to people, and the way in which such prices can in fact lead to allocations that are socially optimal.