Objectives

The course consists of three parts.

In the first part of the course we study non-strategic market behavior, i.e. situations where a firm takes the actions of rivals as given, which leads us to an in-depth discussion of market power and more specifically monopoly power.

This part is taught by Octavian Strimbu. It covers Part I of Jean Tirole’s book (chapters 1 to 4), and will be complemented by related topics, readings and applications that are not in that book (e.g. the two-sided markets).

In the second part of the course we study models of strategic interaction in imperfectly competitive markets. The main modelling tool is game theory. The choice of topics includes current hot issues in competition policy practice such as collusion and mergers.

This part is taught by Christian Bach. The lecture material provided for this part is self-contained and yet some background reading will be indicated. Before the beginning of this part, you should refresh your knowledge of Game Theory (e.g. chapter 11 in Jean Tirole’s book).

In the third part of the course students are invited to explore and present to the rest of the class a topic of their interest. This part enables all students to experience how formal investigation can help them better understand real world markets, and a wide range of topics of their interest can be covered.

Contents

There is a weekly session, running from 8:30 to 12:00 in Anthropole 5081.

1. Introduction to the 1st Part. Microeconomic fundamentals. Monopoly
2. Monopoly contd
3. Vertical Relations
4. Two-sided markets
5. Introduction to the 2nd Part. Market Prototypes
6. Static Models of Imperfect Competition
7. Product Differentiation
8. Dynamic Models of Imperfect Competition
9. Collusion
10. Mergers
11. 3rd Part. Student Presentations and Feedback

References

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

Additional readings specific to each topic will be handed out during the course.

Pre-requisites

Microeconomic Theory (Analyse économique: Microéconomie)

Evaluation

First attempt

Exam:

Without exam (cf. terms)  

Evaluation:

There is no exam.

The grade is based on:

- homework component (50%) with PS1 (20%), PS2 (15%), and PS3 (15%);

- journal article discussion component (50%) with class presentation (25%), and short written report (25%).

The homework component of the three problem sets (PS) is individual. PS1 is worth 20% and is due on March 25, PS2 is worth 15% and is due on April 22, and PS3 is worth 15% and is due on May 20.

The journal article discussion comprises i) a class presentation of a journal article and ii) a short written report based on the same article and its presentation (each accounts for half of the component grade, i.e. 25% each).

The journal article can be either a theoretical, empirical, or an experimental study in the field of Industrial Organization (further instructions will follow incl. a selection of journals). Each student should prepare a 20 minute presentation of the article with more or less the following guidelines: (1) research question, (2) motivation, (3) the model, (4) main result(s), (5) sketch of proof(s) of main result(s), (6) economic intuition behind the main result(s), (7) discussion of assumptions or methodology, and (8) conclusion. The written report is supposed to follow the same structure.

The presentations take place on the last 3 weeks of the course.

Retake

Exam:

Written 2 hours

Documentation:

Not allowed

Calculator:

Allowed with restrictions

Evaluation:

The retake exam is written and closed book. The duration is 2 hours. The retake exam determines 100% of your final grade.