INDUSTRIAL ORGANIZATION

This module provides basic knowledge on the functioning of imperfectly competitive markets by analysing formal models of strategic interaction. By this doing, the course complements the content of the Microeconomics part studied in the module Economia Politica in the first year.

1. Apply the knowledge of microeconomics and game theory to analytically connect to real world in industries
2. Develop ideas about several non-cooperative solution concepts in game theory
3. Consolidate skills useful to approach the study of advanced modules in microeconomics/game theory
4. Learn to model analytically various industrial environments.
5. Acquire the ability to pursue theoretical research in Economics

Pre-requisite: Microeconomics (Economia Politica)

Topic 1: A Review of Basic Game Theory•Tirole, chapter 11•Gibbons, chapters 1, 2•Fudenberg and Tirole, chapters 1, 3, 4
Topic 2: Classic Static Oligopoly Models•Tirole, chapter 5•Church and Ware, chapter 8•Kreps, D. M. and J. A. Scheinkman (1983),Quantity Precommitment and Bertrand CompetitionYield Cournot Outcomes, Bell Journal of Economics, 14(2), 326-337.
Topic 3: Dynamic price competition and tacit collusion•Tirole, chapter 6•Church and Ware, chapter 10
Topic 4: Competition with product differentiation•Tirole, chapter 7•Church and Ware, chapter 10•Hotelling, H. (1929),Stability in Competition, Economic Journal, 39: 41-57•D’Aspremont, C., J. Gabszewiez and J.F. Thisse, (1979),On Hotelling’s Stability in Competition,Econometrica.•Shaked, A. and J. Sutton (1983),Natural Oligopolies, Econometrica, 51(5):1469-83
Topic 5: Entry, accommodation and exit•Tirole, chapter 8•Church and Ware, chapters 13, 4
Topic 6: Sunk costs and market structure•Sutton, chapters 2, 3, 4, 5•Sutton, J. (1997),Game Theoretic Models of Market Structure, In Advances in Economics andEconometric, edited by D. Kreps and K. Wallis. (Proceedings of World Congress of Econo-metric Society, Tokyo, 1995.) Cambridge: Cambridge University Press, pp. 66-86

•Tirole, J. (1988), The Theory of Industrial Organization, MIT press
•Church, J and R. Ware, Industrial Organisation: A Strategic Approach, McGraw Hill, 2000(free pdf available online)
•Sutton, J., Sunk Costs and Market Structure, MIT press, 1991
•Gibbons, R., A Primer in Game Theory, FT Prentice Hall, 1992
•Fudenberg, D. and J. Tirole, Game Theory, MIT Press, 1998

Written exam, lasting 75 minutes, with problem sets similar to those covered in class.
To pass the exam, one needs 18 marks. The weight of each question is indicated in the exam paper.

30 h of lectures during Period 4

English

written