Industrial Organization (P)

Course 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.
Education

MSc programme in Economics – elective course

Bacheloruddannelsen i økonomi – Prioriteret valgfag på 3. år (angivet med et p)

The Danish BSc programme in Economics - prioritized elective at the 3rd year (symbolized by ‘p’).

 

Learning outcome

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

 

Knowledge:

  • Describe, explain and account for the main methodologies, concepts and issues used in the theory of industrial organization.
  • Understand, discuss and account for 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.
  • Apply the acquired knowledge and skills in new contexts—for example, when solving analytical problems in related (perhaps more advanced) courses and in professional life.

Lectures and exercise classes.

The exercise classes, in particular, provide opportunities for discussions where the students are expected to participate actively.

The students are encouraged to ask the lecturer and the TAs broad questions about their solutions and possible solution methods of the assignments. For example, a student who has used another approach when solving an assigned problem than the teacher proposes can ask about whether that approach also would work.

Pandemic:
In case of a pandemic like Corona the teaching in this course may be changed to be taught either fully or partly online. For further information, see the course room on Absalon.

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.

It is strongly recommended that the students have passed the courses Microeconomics I and Microeconomics II in the Bachelor program at the Departement of Economics, or equivalent courses.

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 Microeconomics III course at the Department of Economics or an equivalent course , is required. It is acceptable to acquire that proficiency by following Microeconomics III in parallel with Industrial Organization. But knowing and understanding game theory is essential.

Schedule:
2 hours lectures one time a week from week 6 to 20 (except holidays).
2 hours exercise classes one time a week from week 6 or 7 to 21 (except holidays).

The overall schema for the BA 3rd year and Master can be seen at KUnet:
MSc in Economics => "courses and teaching" => "Planning and overview" => "Your timetable"
BA i Økonomi/KA i Økonomi => "Kurser og undervisning" => "Planlægning og overblik" => "Dit skema"

Timetable and venue:
To see the time and location of lectures and exercise classes please press the link/links under "Timetable"/​"Se skema" at the right side of this page (F means Spring). The lectures are shown in each link.

You can find the similar information in English at
https:/​/​skema.ku.dk/​ku2021/​uk/​module.htm
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-F21; [Name of course]”
-Select Report Type: “List – Weekdays”
-Select Period: “Forår/Spring – Week 5-30”
Press: “ View Timetable”

Please be aware regarding exercise classes:
- The schedule of the exercise classes is only a pre-planned schedule and can be changed until just before the teaching begins without the participants accept. If this happens it will be informed at the links in the right side, in the app myUCPH and at your personal schema at KUnet.
- If too many students have wished a specific class, students will be registered randomly at another class.
- It is not possible to change class after the second registration period has expired.
- If there is not enough registered students or available teachers the exercise classes may be jointed.
- The student is not allowed to participate in an exercise class not registered, because the room has only seats for the amount of registered student.
- That the study administration allocates the students to the exercise classes according to the principles stated in the KUnet.
- That it is the students´s own responsibility to continuously update themselves about their studies, their teaching, their schedule, their exams etc. through the study pages, the course description, the Digital Exam portal, Absalon, KUnet, myUCPH app, the curriculum etc.

Oral
Collective

 

The students should first, themselves, work on the assigned problem sets. Then, by actively participating in discussions in the exercise class, the students will receive collective oral feedback from the teacher and other students.

 

ECTS
7,5 ECTS
Type of assessment
Written examination, 3 hours under invigilation
in the exam venues of the university.

The exam assignment is given in English and must be answered in English.

Pandemic:
In case of a pandemic like Corona the date, time and type of exam as well as use of aids may be changed. Any further information will be announced here in the Exam section.
____
Aid
Without aids

for the written exam.

 

In case of an oral reexam, please go to the section "Reexam" for further information about allowed aids.

__

Marking scale
7-point grading scale
Censorship form
No external censorship
for the written exam. The exam may be chosen for external censorship by random check.
____
Criteria for exam assessment

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

 

To receive the top grade, the student must with no or only a few minor weaknesses be able to demonstrate an excellent performance displaying a high level of command of all aspects of the relevant material and can make use of the knowledge, skills and competencies listed in the learning outcomes.

Single subject courses (day)

  • Category
  • Hours
  • Lectures
  • 28
  • Class Instruction
  • 28
  • Preparation
  • 147
  • Exam
  • 3
  • English
  • 206