Industrial Organization

Course Description

The course will discuss various industrial market structures: Competitive markets, monopolies, oligopolies, monopolistic competition, and their effect on economic performance. The discussion will include pricing strategies, product differentiation, and advertising as well as innovation and intellectual property.

Course Objectives

This course will enable students

• to describe and analyze imperfectly competitive markets with empasis on concentration and market power.
• to describe and analyze how market structures impact the behavior of firms and the firms’ strategies in imperfectly competitive markets.
• to apply their knowledge of game theory to understand the strategic behavior of firms in the market.
• to use the theoretical insights presented in this course to explain observed features of particular markets and industries.
• to identify business strategies that allow firms to achieve a competitive advantage.

Course Materials

Required:

The course will follow the textbook:
Belleflamme, Paul, and Martin Peitz. 2016. Industrial Organization: Markets and Strategies, 2nd ed. Cambridge University Press.
Available from bookdepository and amazon

The reading assigments from this textbook are listed below.

Further recommendations:

• Waldman, Don E., and Elizabeth Jane Jensen. 2016. Industrial Organization: Theory and Practice, 4th ed. London: Routledge.
  As an alternative reference. The corresponding chapters for the topics discussed in our meetings are indicated as [TP:Chapter] in the list below.
  bookdepository amazon
• Spiegler, Ran. 2014. Bounded rationality and industrial organization. Oxford: Oxford University Press.
  Only if you are interested. This is an advanced text that deviates from assuming consumers being perfectly rational.
  bookdepository amazon
• Tirole, J., 1988. The theory of industrial organization. MIT Press. If you want to get a PhD…
• Robert, Gibbons. 1992. A primer in game theory. FT Prentice Hall Publisher.
  Also known as Robert, Gibbons. 1992. Game Theory for Applied Economists. Princeton University Press.
  Our textbook has a brief game theory appendix. This book would be a more in-depth treatment for your reference.

Course Requirements:

Students must read the corresponding chapters of the textbook before each session. Reading the economic press will also be helpful.

I recommend that you try to solve the end of chapter problems in preparation and review of each class session.

Class meets Mondays at 12:30 (see below).

Instructor Information:

Prof. Dr. Dennis A. V. Dittrich
dennis.dittrich@touroberlin.de
http://economicscience.net

My office hours are 24 hours a day via email. Appointments for meetings can be arranged through the my webpage at: http://economicscience.net/content/book-appointment.

Updated information, links to the literature, additional materials, etc. can be found on my webpage as well.

Grading Guidelines:

Workload

A typical 3 credit course requires 150 hours of your time. The table below identifies how I expect those 150 hours will be allocated. While you do not receive direct marks for reading, reading will affect your class participation mark (your ability to participate in class discussions and activities) and your final exam mark.

Topics and Reading Assignments

Session 1 (04.09.)

• Markets and Strategies (Ch. 1)
• Firms, consumers, and the market (Ch. 2)
  [TP:2, 3]

Session 2 (11.09.)

• Static imperfect competition (Ch. 3)
  [TP:8]

Session 3 (18.09.)

• Dynamic aspects of imperfect competition (Ch. 4)
  [TP:8]

  Further literature

  • Schelling, T.C., 1960. The strategy of conflict. Harvard University Press.

Session 4 (25.09.)

• Product differentiation (Ch. 5)
  [TP:13]

Session 5 (02.10.)

• Advertising and related marketing strategies (Ch. 6)
  [TP: 14]

Session 6 (16.10.)

• Consumer inertia (Ch. 7)
  [TP:5]

Session 7 (23.10.)

• Group pricing and personalized pricing (Ch. 8)
• Menu Pricing (Ch. 9)
  [TP:16]

Session 8 (30.10.)

• Intertemporal Price Discrimination (Ch. 10)
• Bundling (Ch. 11)
  [TP:16]

Session 9 (06.11.)

• Asymmetric information, price and advertising signals (Ch. 12)
• Marketing tools for experience goods (Ch. 13)
  [TP:13, 14]

Session 10 (13.11.)

• Innovation and R&D (Ch. 18)
  [TP:15]

  Further literature

  • Scotchmer, Suzanne. 2004. Innovation and incentives. MIT Press.
  • Foray, Dominique. 2004. Economics of knowledge. MIT Press

Session 11 (20.11.)

• Intellectual property (Ch. 19)
  [TP:15]

  Further literature

  • Varian, H.R., Farrell, J. and Shapiro, C., 2004. The economics of information technology: An introduction. Cambridge University Press.

Session 12 (27.11.)

• Markets with network goods (Ch. 20)
  [TP:5]

  Further literature

  • Shy, Oz. 2001. The economics of network industries. Cambridge University Press.
  • VanHoose, David. 2011. Ecommerce economics. 2nd ed. Taylor & Francis.

Session 13 (04.12.)

• Strategies for network goods (Ch. 21)
  [TP:5]

  Further literature

  • Ezrachi, A., and M. Stucke. 2016. Virtual Competition: The promise and perils of the algorithmic-driven economy. Harvard University Press.
  • Shapiro, C. and Varian, H.R., 1998. Information rules: a strategic guide to the network economy. Harvard Business Press.
  • Varian, H.R., Farrell, J. and Shapiro, C., 2004. The economics of information technology: An introduction. Cambridge University Press.

Session 14 (11.12.)

Session 15 (08.01.)

• Final (oral)

New Schedule for Topics and Reading Assignments

Session 5 (13.11.)

• Product differentiation (Ch. 5)
  [TP:13]

Session 6 (20.11.)

• Advertising and related marketing strategies (Ch. 6)
  [TP: 14]

Session 7 (22.11.) Wednesday, 15:30

• Consumer inertia (Ch. 7)
  [TP:5]

Session 8 (04.12.)

• Group pricing and personalized pricing (Ch. 8)
• Price Discrimination [TP:16]
• Menu Pricing (Ch. 9)
  [TP:16]

Session 9 (06.12.) Wednesday, 15:30

• Intertemporal Price Discrimination (Ch. 10)
• Bundling (Ch. 11)
  [TP:16]

Session 10 (11.12.)

• Asymmetric information, price and advertising signals (Ch. 12) [TP:13, 14]

Session 11 (13.12.) Wednesday, 15:00

• Innovation and R&D (Ch. 18)
  [TP:15]

  Further literature

  • Scotchmer, Suzanne. 2004. Innovation and incentives. MIT Press.
  • Foray, Dominique. 2004. Economics of knowledge. MIT Press

• Asymmetric information, price and advertising signals (Ch. 12) cont’d

• NEW: Marketing Tools for Experience Goods (Ch. 13)

Session 12 (18.12.)

• Intellectual property (Ch. 19)
  [TP:15]

• Markets with network goods (Ch. 20)
  [TP:5]

  Further literature

  • Shy, Oz. 2001. The economics of network industries. Cambridge University Press.
  • VanHoose, David. 2011. Ecommerce economics. 2nd ed. Taylor & Francis.
  • Varian, H.R., Farrell, J. and Shapiro, C., 2004. The economics of information technology: An introduction. Cambridge University Press.

Session 13 (21.12.) Thursday, 12:30

• Markets with network goods (Ch. 20) cont’d
  [TP:5]

• Strategies for network goods (Ch. 21)
  [TP:5]

  Further literature

  • Ezrachi, A., and M. Stucke. 2016. Virtual Competition: The promise and perils of the algorithmic-driven economy. Harvard University Press.
  • Shapiro, C. and Varian, H.R., 1998. Information rules: a strategic guide to the network economy. Harvard Business Press.
  • Varian, H.R., Farrell, J. and Shapiro, C., 2004. The economics of information technology: An introduction. Cambridge University Press.

Session 14 (04.1.)

• Strategies for network goods (Ch. 21) cont’d
  [TP:5]

Session 15 (08.01.)

• Final (oral)

Topics and reading assignments are subject to changes.

Problem sets

We will discuss problems – mostly taken from our textbook – in class. You will find the problems for download in a dropbox folder: here.

If you do not have a Dropbox account yet: Get one for free!