Empirical Industrial Organization

2020/2021

Academic Year

ENG

Instruction in English

3

ECTS credits

Delivered by:

Department of Applied Economics

Type:

Elective course

When:

1 year, 3 module

Instructor

Kazakova, Ekaterina

Course Syllabus

Abstract

This course is designed to introduce students to the tools for the empirical analysis of industries and markets. Broadly speaking, empirical industrial organization (EIO) combines empirical methods, data, and models to analyze imperfect competition and the organization of markets. Modern methods of the EIO are widely applied in merger review, antitrust litigation, regulatory decision making, marketing, and other related fields. Moreover, the increasing availability of firm- and consumer-level data ("big data") opens new empirical questions, that cannot be answered without understanding the basics of the EIO analysis. In this course, we will cover traditional empirical models related to (1) demand estimation for homogeneous and differentiated products; (2) production function estimation and firm productivity; (3) identification of conduct; (4) static entry/exit models. The course is associated to exercise sessions devoted to practical applications. We will replicate some of the empirical workhorse models using software like Stata and MATLAB.

Learning Objectives

• You are expected to acquire a broad knowledge of the key topics and techniques of empirical industrial organization.
• You are expected to acquire a broad knowledge of the key topics and techniques of empirical industrial organization.
• You are expected to be able to conduct your own independent industrial analysis using real-life data.
• You are expected to be able to conduct your own independent industrial analysis using real-life data.

Expected Learning Outcomes

• Coming to the same level of knowledge of the needed econometric tools.
• Learning methods to detect collusion on the data.
• Ability to estimate demand.
• Ability to estimate production function.
• Ability to model market entry.
• Deepen knowledge of the previously discussed topics.

Course Contents

• Introduction to Empirical Industrial Organization
  Review of the basic econometrics tools, introduction to the topics and problems of EIO.
• Competition, collusion and cartel
  Porter (1983, Bell); Bresnahan (1987, JIE); Genesove & Mullin (1998, RAND)
• Estimation of demand for differentiated goods
  Berry (1994, RAND); Berry, Levinsohn, Pakes (1995, Econometrica); Train (2009, Cambridge University Press)
• Estimation of production functions
  Olley &Pakes (1996, Econometrica); Levinsohn & Petrin (2003, ReStud); Ackerberg, Caves, Frazer (2015, Econometrica)
• Estimation of static entry/exit games
  Bresnahan & Reiss (1991, JPE); Seim (2006, RAND)
• Extensions and applications or additional selected topics in EIO
  This lecture includes topics based on students' interests. It can include merger analysis, auctions, basics of the dynamic EIO, or deepen the previously discussed topics.

Assessment Elements

• Homework 1
  The content of homework assignments will be the application of learned estimation techniques in practice and the replication of related papers.
• Term project
  Term project evaluation consists of the short essay in a form of a research proposal.
• Exam
  The final written exam will mainly consist of open questions related to the practical application of EIO for industry analysis.
• Homework 2

Interim Assessment

• Interim assessment (3 module)
  0.3 * Exam + 0.25 * Homework 1 + 0.25 * Homework 2 + 0.2 * Term project

Bibliography

Recommended Core Bibliography

• Belleflamme, P., & Peitz, M. (2010). Industrial Organization : Markets and Strategies. Cambridge, UK: Cambridge eText. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=324082
• Bresnahan, T. F., & Reiss, P. C. (1991). Entry and competition in concentrated markets. Journal of Political Economy, 99(5), 977. https://doi.org/10.1086/261786
• Olley, G. S., & Pakes, A. (1996). The Dynamics of Productivity in the Telecommunications Equipment Industry. Econometrica, (6), 1263. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.ecm.emetrp.v64y1996i6p1263.97
• Steven T. Berry. (1994). Estimating Discrete-Choice Models of Product Differentiation. RAND Journal of Economics, (2), 242. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.rje.randje.v25y1994isummerp242.262

Recommended Additional Bibliography

• Berry, S., Levinsohn, J., & Pakes, A. (1995). Automobile Prices in Market Equilibrium. Econometrica, (4), 841. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.ecm.emetrp.v63y1995i4p841.90