Industrial Organization (P)

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.