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.

Restrictions due to pandemic crisis:
The teaching in this course may be changed to be taught either fully or partly online due to a pandemic crisis like COVID-19. In case of changes and further information, please read the study messages in KUnet or the announcements in the course room on Absalon (for enrolled students).

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.

Please note that details of the syllabus and the course content may change. If so, these changes are informed in Absalon. 

It is strongly recommended that the students have passed the courses Microeconomics I and Microeconomics II in the Bachelor program of Economics, University of Copenhagen, 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.
2 hours exercise classes one time a week from week 6/7 to 20/21.

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/​ku2122/​uk/​module.htm
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-F22; [Name of course]”
-Select Report Type: “List – Weekdays”
-Select Period: “Forår/Spring – Week 5-30”
Press: “ View Timetable”

Please be aware:
- The study administration allocates the students to the exercise classes according to the principles stated in the 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.
- All exercise classes will be taught in English.
- The schedule of the lectures and the exercise classes can be changed without the participants´ acceptance. If this happens you can see the new schedule in your personal timetable at KUnet, in the app myUCPH and through the links in the right side and the link above.
- It is the students´s own responsibility continuously throughout the study to stay informed about their study, their teaching, their schedule, their exams etc. through the curriculum of the study programme, the study pages at KUnet, student messages, the course description, the Digital Exam portal, Absalon, the personal schema at KUnet and myUCPH app 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
as an ITX-exam in the exam venues of the university.

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

Changes due to Coronavirus:
In the event that COVID-19 restrictions may affect the conduction of the ITX-exams, the written exam and the re-sit exam will be changed to a take-home exam with all aids. If done so, the changes will be announced in study messages at KUnet and in the Digital Exam portal.

The take-home exam is an individual exam and it is not allowed to communicate with any one about the exam assignment nor the solution at all. It is also prohibited to distribute data and other information at all. If this or alike actions happens, it will be regarded as cheating and plagiarism.
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Aid

No aids allowed at the written ITX-exam.

 

If the ITX-exam is changed to a take-home exam due to COVID-19, the written take-home exam will be with all aids.

 

Information about allowed aids for the re-examination, please go to the section "Re-exam".

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Marking scale
7-point grading scale
Censorship form
No external censorship
at the written exam.
The written ITX-exam may be chosen for external assessment by random sample.
An oral re-examination may be with external assessment.
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Criteria for exam assessment

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

 

In order to obtain the top grade “12”, 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.

 

In order to obtain the passing grade “02”, the student must in a satisfactory way be able to demonstrate a minimal acceptable level 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