AØKA08020U  Industrial Organization

Volume 2017/2018
Education

MSc programme in Economics – elective course

Bacheloruddannelsen i økonomi – Prioriteret valgfag på 3. år

The Danish BSc programme in Economics - prioritized elective at the 3rd year

MSc programme in mathematics-economics

Content

This course is an introduction to modern industrial organization based on game-theoretic analysis. Industrial organization is the study of how (product) markets work and how firms compete, in particular when there are a limited number of firms in the market. It addresses questions such as how firms acquire and use market power, and how firms interact strategically. Insights from industrial organization has implications for competition policy. For example, should competition authorities try to block mergers? Should they try to prevent firms from colluding? If so, how can they best do that?

The course covers the basic theory of industrial organization (with only a quick look at empirical methods). In particular, the following areas are discussed (but, due to time constraints, possibly not all of these in any given year):

  • Monopoly

  • Static oligopoly theory with a homogeneous good (Bertrand, Cournot, Edgeworth, Kreps-Scheinkman).

  • Repeated oligopoly interaction and tacit collusion (including, inter alia, the Rotemberg-Saloner and Green-Porter models). Factors that hinder and facilitate collusion.

  • Price discrimination (behavior-based price discrimination, static 3rd degree price discrimination, welfare effects).

  • Vertical control (double marginalization).

  • Empirical tests of oligopoly (Bresnahan-Lau).

  • Product differentiation (Hotelling).

  • Limit pricing and predation (Milgrom-Roberts).

  • Markets with network goods.

  • Advertising

  • Strategic incentives.
Learning Outcome

After completing the course, the student should be able to:

Knowledge:

  • Describe and explain main methodologies, concepts and issues used in the theory of industrial organization.

  • Understand the logic behind the results of the formal models studied in the course.

Skills:

  • Select relevant theories and methods for analyzing questions related to industrial organization.

  • Solve formal models using tools from mathematical optimization theory and game theory.

  • Analyze formal models that are variations of the models and theories covered in the course and to provide economic intuition for the results obtained.

Competences:

  • Critically think about and discuss competition policy questions, in light of the theories learned in the course.

 

Please note that details of the syllabus and the course content may change. 

Main textbook (selected chapters):

  • Belleflamme, Paul and Martin Peitz (2015), Industrial Organization: Markets and Strategies, 2nd edition, Cambridge University Press.

Shorter segments of the following texts:

  • Church, Jeffrey and Roger Ware (2000), Industrial Organization: A Strategic Approach, McGraw-Hill

  • Tirole, Jean (1988), The Theory of Industrial Organization, MIT Press.

  • Osborne, Martin J. (2004), An Introduction to Game Theory, Oxford University Press.

Ordover, Janusz A. (2008), “Durable Goods Markets and Aftermarkets.” In The New Palgrave Dictionary of Economics. eds. by Steven N. Durlauf, and Lawrence E. Blume, Basingstoke: Palgrave Macmillan.

The students must have passed Micro I and Micro II or equivalent. Moreover, a large part of the course consists of analyses of formal economic models. Therefore, a proficiency in solving game-theoretic models, at the level of the Micro III (C) course, is required. It is acceptable to acquire that proficiency in parallel with following the Industrial Organization course (e.g., by also following Micro III (C)). But knowing and understanding game theory is essential.
Lectures and exercise classes.
Schedule:
2 hours lectures 2 times a week from week 6 to 20 (except hollidays).


Timetable and venue:
The schedule for the semester spring 2018 will be available no later than 7th of November 2017
Credit
7,5 ECTS
Type of assessment
Written examination, 3 hours under invigilation
at the computers of the University. The exam assignment is given in English and must be answered in English.
Exam registration requirements

None

Aid
Without aids
Marking scale
7-point grading scale
Censorship form
External censorship
if chosen by the Head of Studies
Exam period

The schedule for the exam 2018 will be available no later than 7th of November 2017

 

The written exam takes place in the exam venues of the university 

 

The exact time of the exam will be informed in the Self-Service at KUnet.

For enrolled students more information about examination, rules, exam schedule etc. is available at the intranet for master students (English) and bachelor students (Danish).

Re-exam

The schedule for the exam 2018 will be available no later than 7th of November 2017

The written exam takes place in the exam venues of the university 

The exact time of the exam will be informed in the Self-Service at KUnet.

If only a few students have registered for the re-exam, the exam might change to an oral exam including the date, time and place for the exam, which will be informed by the Examination Office.

For enrolled students more information about examination, rules, re-exam schedule etc. is available at the intranet for master students (English) and bachelor students (Danish).

Criteria for exam assesment

Students are assessed on the extent to which they master the learning outcome for the course.

To receive the top grade, the student must be able to demonstrate in an excellent manner that he or she has acquired and can make use of the knowledge, skills and competencies listed in the learning outcomes.

The student must display a high level of command of all aspects of the relevant material, with no or only a few minor weaknesses.

  • Category
  • Hours
  • Lectures
  • 28
  • Class Exercises
  • 28
  • Preparation
  • 147
  • Exam
  • 3
  • Total
  • 206