Industrial Organization Theory
- You will become familiar with the most important models of the industrial organization for understanding strategies chosen by firms to acquire and maintain market power.
- This course improves your (micro-)economic reasoning and modeling skills, which, in particular, can be useful for writing your term papers and Bachelor theses involving analysis at the firm or industry level.
- IntroductionIntroduction to IO. History of IO. Main questions studied in IO.
- Review of perfect competitionModeling demand and supply sides in a perfectly competitive environment. General equilibrium.
- Review of game theoryReview of the basic tools in the game theory that are applied in IO. Static and dynamic games.
- MonopolyPrice discrimination, non-linear pricing, intertemporal discrimination. Multiproduct monopolist. Dominant firm.
- Static oligopolyCournot and Bertrand models for homogenous good markets.
- Dynamic oligopoly and collusionCollusion. Punishment schemes.
- Product differentiationNon-address (goods) approach: Cournot and Bertrand models with differentiated products. Monopolistic competition. Address (location) approach: Hotelling and Salop models. Characteristics approach.
- AdvertisingInformative and persuasive advertising in monopoly. Informative and persuasive advertising in oligopoly.
- Patents and R&DMajor and minor innovations. Innovation and market structure. R&D spillovers, cooperation in R&D and joint ventures. Patents.
- Imperfect informationAkerlof model. Signaling about quality with reputation, advertisement, price, warranties. Consumer search.
- Network effectsDirect and indirect network effects. Competition in a network goods market. Regulation of a network goods market.
- Vertical relationsDouble marginalization. Revenue sharing. RPM. Exclusive dealership and exclusive territories. Chicago critic.
- MergersSimple Cournot horizontal mergers. Extensions: the merger of several firms, scale economies/capacity constraints, synergies, successive mergers, entry, Bertrand competition, product differentiation, coordinated effects. Welfare analysis of mergers.
- Entry and market structureMarket definition. Concentration indices. Entry and related strategies. Entry deterrence and entry accommodation. Bain-Sylos postulate. Judo economics. Brand prefiltration.
- AntitrustHistory of antitrust. Detecting collusion. Indistinguishability theorem. Leniency programs. Review of market regulation discussed in the previous lectures.
- QuizEvery week, there will be a short online quiz which is aimed to test understanding of the basic concepts discussed in the previous lecture
- HomeworksThe content of homework assignments will be mainly problem-solving. There are 5 small homework assignments.
- Group presentation20-minutes presentation of one theoretical or empirical IO paper during the seminar.
- EssayEssay on the same paper as presented in the class.
- ExamThe final written exam consists of three parts: 20 true/false questions, 3 open questions related to the practical application of IO for industry analysis, and 2 theory problems.
- Interim assessment (2 module)0.15 * Essay + 0.4 * Exam + 0.1 * Group presentation + 0.25 * Homeworks + 0.1 * Quiz