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Advanced Topics in Industrial Organization

  • Enseignant(s):  
  • Titre en français: Organisation Industrielle avancée
  • Cours donné en: anglais
  • Crédits ECTS:
  • Horaire: Semestre de printemps 2017-2018, 4.0h. de cours (moyenne hebdomadaire)
      WARNING :   this is an old version of the syllabus, old versions contain   OBSOLETE   data.
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Part I:

The goal of the first part of the course is to make students familiar with nonstrategic market behavior and the exercise of monopoly power.

Part II:

The purpose of the second part of the course is to make students familiar with the basic models of strategic interaction in imperfectly competitive markets.


Part I

The first part of the course will cover Part I of Jean Tirole’s book (chapters 1 to 4). We will follow the sequence of the book: monopoly behaviour, product selection, price discrimination and vertical control. At the end of the course regulation of monopolies will be discussed based on Laffont & Tirole (1993). More details on readings will be announced in class. We will also discuss some empirical papers which will be made available online.

1. Monopoly

Main questions: How should a monopolist set its price? What is the intertemporal pricing behavior of a durable-good monopolist? When should a durable-good monopolist rent rather than sell its product?


-Tirole, Ch. 1

1.1 Pricing Behavior

1.2 Durable Goods and Intertemporal Price Discrimination

1.2.1 Leasing versus Selling

1.2.2 The Coase Conjecture

2. Product Selection, Quality and Optimal Number of Products

Main questions: What commodities should be produced and sold? Does a monopolist have an incentive to choose the optimal products from the perspective of a social planner?


-Tirole, Ch. 2

2.1 The Notion of Product Space

2.2 Product Selection

2.2.1 Product Quality

2.2.2 Optimal Number of Products

3. Price Discrimination

Main questions: What is price discrimination? What are the types of price discrimination? What are the consequences of price discrimination?


-Tirole, Ch. 3

3.1 Perfect (First-Degree) Price Discrimination

3.2 Multimarket (Third-Degree) Price Discrimination

3.3 Personal Arbitrage and Screening (Second-Degree Price Discrimination)

4. Vertical Control

Main questions: What are the factors that create an incentive for a producer of a final good to acquire vertical control of a supplier of an input when the market for the input is noncompetitive? What are the factors that create an incentive for a manufacturer to acquire vertical control of a retailer who can provide services to make the final good more attractive to consumers?


-Tirole, Ch. 4

4.1 Externalities and Vertical Control

4.2 Double Marginalization

4.3 Downstream Moral Hazard

The second part of the course will cover Part II of Jean Tirole’s book (chapters 5 to 8). We will follow the sequence of the book: short-run oligopoly models, dynamic price competition and tacit collusion, product differentiation, and strategy and market structure. Before the start of the second part of the course you should refresh your knowledge of Game Theory. The best way to do that is to read chapter 11 (“Noncooperative Game Theory: A User’s Manual”) in The Theory of Industrial Organization.

Part II

5. Short-run Oligopoly Models

Main question: How do oligopolistic firms in an industry with a homogeneous product interact in the short-run?


- Tirole Ch. 5: Short-run Price Competition

- Kreps and Scheinkman (1983)

5.1 Introduction

5.1.1 Nash Equilibrium

5.1.2 Strategic Complements and Substitutes

5.1.3 Cournot Model

5.2 The Bertrand Paradox

5.2 Solutions to the Bertrand Paradox

5.2.1 Repeated Interaction

5.2.2 Product Differentiation

5.2.3 Private Information about Cost

5.2.4 Search Costs and Imperfect Information about Prices

5.2.5 Switching Costs

5.2.6 Capacity Constraints

5.3 Kreps and Scheinkman (1983)

6. Dynamic Price Competition and Tacit Collusion

Main questions: How can firms sustain collusive outcomes? What are the factors that influence collusion?


- Tirole, Ch. 6: Dynamic Price Competition and Tacit Collusion

- Rotemberg and Saloner (1986)

- Green and Porter (1984)

6.1 Repeated Interaction

6.1.1 Finite T

6.1.2 Infinite T

6.2 Factors that facilitate collusion

6.3 Rotemberg and Saloner (1986)

6.4 Green and Porter (1984)

7. Product Differentiation: Price Competition and Non-Price Competition

Main questions: How is the range of products available to consumers determined under imperfect competition? What is the impact of product differentiation on market structure? Why do firms advertise? How much should firms spend on advertising?


- Tirole Ch. 7: Product Differentiation: Price Competition and Non-Price


7.1 Horizontal Product Differentiation

7.2 Spatial Product Differentiation

7.2.1 Linear Model

7.2.2 Circular Model

7.2.3 Sequential Entry

7.3 Brand Proliferation and the Persistence of Monopoly

7.4 Advertising and Oligopoly

7.5 Vertical Product Differentiation

8. Strategy and Market Structure

Main questions: What actions can firms take to prevent entry of new firms or to force a competitor to exit a market? What actions can firms take to create competitive advantages?


- Tirole Ch. 8: Entry, Accommodation, and Exit

8.1 Introduction: Barriers to Entry

8.2 Stackelberg’s Two Stage Game

8.3 Spence-Dixit Model

8.4 Business Strategies: A Taxonomy

8.4.1 Entry Deterrence

8.4.2 Entry Accommodation

8.4.3 Exit Inducement

8.5 Business Strategies: Applications

8.5.1 Strategic Limitations of Capacity

8.5.2 Strategic Choice of Location

8.5.3 Strategic Managerial Compensation


The Theory of Industrial Organization, Jean Tirole, Cambridge, Massachusetts, The MIT Press.

Industrial Organization: A Strategic Approach, Jeffrey Church and Roger Ware, Irwin/McGraw- Hill.

A Theory of Incentives in Procurement and Regulation, Jean-Jacques Laffont and Jean Tirole, Massachusetts, The MIT Press.

Additional articles will be handed out during class.


Microeconomic Theory (Analyse économique: Microéconomie)


1ère tentative

Sans examen (cf. modalités)  

Your grade in the course will be determined on the basis of: participation during lectures (10%), take home problem sets (60%), and presentation of a journal article (30%).


Ecrit 3h00 heures
Non autorisée
Autorisée avec restrictions

If you fail the course you will have to take a final exam. The final exam is written and closed-book. The duration of the final exam is 3 hours. In case of a retake the retake exam determines 100% of your final grade.

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