Industrial Organization

2024/2025

Academic Year

ENG

Instruction in English

6

ECTS credits

Delivered by:

Department of Applied Economics

Type:

Elective course

When:

3 year, 1, 2 module

Instructor

Kazakova, Ekaterina

Course Syllabus

Abstract

The course introduces the theory of industrial organization (IO) which focuses on the business behavior of firms, its implications for industry structures, and policies of industry regulation. More broadly, we look at the imperfect competition and strategic interactions of firms in different sectors and explain differences across industries. Among possible strategies, we will discuss pricing and production strategies; competition in innovations and cooperation in R&D; informative and persuasive advertising strategies; various anticompetitive practices: collusion, retail price maintenance, price discrimination, tying, exclusive clauses, predatory behavior and entry deterrence. You will become familiar with the main (static and dynamic) models of monopoly and oligopoly, horizontal and vertical product differentiation, models of asymmetric information. Moreover, we will analyze the industry structure and performance. You will study how to measure the market concentration and relate it to the level of competition. Particular emphasis will be given on the determinants and consequences of vertical and horizontal mergers. Throughout the course, we will always discuss possible ways of market regulation and related antitrust policies. Prerequisites: minimal grade 6 for Micro-1, Micro-2.

Learning Objectives

• 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.

Expected Learning Outcomes

• Ability to model advertising choices. Understanding of consequences of advertising.
• Ability to model pricing decisions and distinguish different types of price discrimination.
• General knowledge about antitrust and competition policy.
• Good understanding of the Hotelling model and differences between address and non-address approached to differentiation modeling.
• Learning different techniques to reach vertical integration outcomes without vertical integration.
• Learning different ways to signal quality and understanding of distortions that come with uncertainty. Understanding of the basics of consumer search.
• Learning of the basics of merger analysis.
• Learning the basics of collusion, incentives to collude and sustainability of collusion.
• Learning the basics of R&D decisions and regulation of patents.
• Review of perfect competition, a good understanding of the basics.
• Review of the basics of game theory. Ability to find NE, SPNE and PBNE.
• Understanding of differences of quantity and price competition, very good understanding of the basic homogenous good models.
• Understanding of the basic questions asked in IO. Learning the history of IO.
• Understanding of the consequences of the presence of network effects, the ability to apply this knowledge to the modeling of markets with network effects.
• Understanding of the entry deterrence and entry accommodation strategies and their implication for the market equilibrium outcomes. Understanding how to define the market and measure concentration.

Course Contents

• Introduction
• Review of perfect competition and monopoly
• Review of game theory
• Static oligopoly
• Dynamic oligopoly and collusion
• Pricing strategies
• Product differentiation
• Advertising
• Patents and R&D
• Imperfect information
• Network effects
• Platforms
• Vertical relations
• Mergers
• Entry and market structure
• Antitrust

Assessment Elements

• Quiz
• Homework
• Essay
• Exam
• Presentation

Interim Assessment

• 2024/2025 2nd module
  0.15 * Essay + 0.4 * Exam + 0.1 * Homework + 0.15 * Homework + 0.05 * Presentation + 0.05 * Presentation + 0.05 * Quiz + 0.05 * Quiz

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
• Oz Shy. (1996). Industrial Organization: Theory and Applications. The MIT Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.b.mtp.titles.0262691795

Recommended Additional Bibliography

• Industrial organization : a strategic approach, Church, J., 2000
• Microeconomic theory, Mas-Colell, A., 1995

Authors

• KAZAKOVA EKATERINA ALEKSANDROVNA