Industrial Organization

2019-2020

Course Objective

Upon completion of the course you:
1. know main models and can apply tools used in industrial organization
for analysis of firm behavior (Bridging Theory and Practice -
Knowledge);
2. understand the notion of market failure, the role of regulation and
the role of antitrust (Bridging Theory and Practice - Knowledge);
3. can name and explain the determinants of the actions taken by firms
and are able to explain the relationships between firms' actions and
market outcomes (Bridging Theory and Practice - Knowledge);
4. are able to determine optimal firm and regulator behavior conditional
on the type of market structure and nature of competition in the market
and draw policy conclusions (Bridging Theory and Practice - Knowledge);
5. are able to apply calculus, optimization, game theory, and
microeconomic tools to analyze such market phenomena as collusion, abuse
of dominance, merger decisions, entry and exit, pricing and regulation
of natural monopoly (Academic and Research Skills);
6. can discuss real-world experiences of abuse of dominant position,
cartel agreements, merger cases and predatory conduct (Bridging Theory
and Practice – Application, Broadening Horizon);
7. are able to analyze real markets, identify the situations where
competitive forces are weak, and discuss public policy measures intended
to deal with diagnosed problems (Academic and Research Skills).
8. have an understanding of the trade-offs and limitations to policy
choices when policy makers are ill-informed, captured, or when markets
are highly dynamic (innovation and platforms) (Bridging Theory and
Practice - Application)

Course Content

Many important and dynamic markets are dominated by a few firms
(examples are Microsoft, Google, Apple, Intel, Airbus and Vodafone).
These firms not only choose their produced quantities, but also their
prices, and the quality of their products. They also lead in technical
innovation. They make strategic decisions to obtain dominant position,
but also abuse their power, gain political influence, and often collude
with each other. These choices have far-reaching effects not only on the
markets in which they operate but also throughout the economy. The
present course is dedicated to a modern analysis and understanding of
the functioning of such markets.

We give students an overview of the theory of Industrial Organization,
provide students with insights in the organization of markets, and give
an overview of the main models and tools used for analysis of
imperfectly competitive markets.

After introducing the basic notions of market failure and market
structure the course concentrates on public policies (antitrust and
regulation) to alleviate possible negative effects on consumer welfare.
In its first part, the course covers key antitrust issues such as abuse
of dominance, collusion, merger analysis, entry deterrence and
predation. A second part covers pricing and regulation of natural
monopoly (economies of scale), regulation under asymmetric information,
public choice aspects of regulation (political influence), and policy
options when markets are dominated by platform firms. We also ask the
question to what extent temporary monopoly positions are necessary or
helpful to stimulate innovation. Empirical approaches will be applied to
evaluate innovation policy in practice.

Teaching Methods

Lectures.
Tutorials.
Seminars.

Method of Assessment

Assignments and presentations - group assessment.
Written exam - individual assessment.

Entry Requirements

Microeconomics I

Familiarity with concepts / topics discussed in chapters 2-8 of
Goolsbee, A., S. Levitt and C. Syverson (2013): Microeconomics. New
York: MacMillan/Worth Publishers.

Students also should be familiar with main analytical tools used in
microeconomics such as calculus, optimization, and integration.

Literature

Church, J. and Ware, R. (2000), “Industrial Organization: A Strategic
Approach,” McGraw Hill (see
https://works.bepress.com/jeffrey_church/23/).

Additional articles (to be specified).

Recommended background knowledge

Microeconomics II
QRM-III (multiple linear regression models with dummy variables)

General Information

Course Code E_EBE3_IO
Credits 6 EC
Period P4
Course Level 300
Language of Tuition English
Faculty School of Business and Economics
Course Coordinator dr. E.I. Motchenkova
Examiner dr. E.I. Motchenkova
Teaching Staff dr. E.I. Motchenkova
dr. S. Hochguertel

Practical Information

You need to register for this course yourself

Last-minute registration is available for this course.

Teaching Methods Seminar, Instruction course, Lecture
Target audiences

This course is also available as: