GAMES, INFORMATION AND CONTRACT THEORY AND INDUSTRIAL ORGANISATION AND COMPETITION POLICY

INDUSTRIAL ORGANISATION AND COMPETITION POLICY

Program

EN IT

Updated A.Y. 2017-2018

Outline (Provisional)

Information Economics. Implementation. Auctions. Adverse Selection. Moral Hazard. Modern Theory of Monopoly. Price Discrimination. Empirical Model of Demand. Firm Conduct. Merger Analysis. Patent and Technology Diffusion.

Exam and grading

The exam for the whole course (GAMES, INFORMATION AND CONTRACT THEORY AND INDUSTRIAL ORGANISATION AND COMPETITION POLICY) consists in three tests: a written exam on Game Theory, an oral presentation on Industrial Organisation, and a take-home exercise on Social Capital. You will have a mark for each test.

The final mark is given by: 0.4*(mark of written exam) + 0.3*(oral presentation) + 0.3*(take-home exercise).

To be passed, the final mark must be no lower than 18. Moreover, the mark of the written exam and one of the other tests (either the oral presentation or the take-home exercise) must be no lower that 18, and the mark of the remaining test (either the oral presentation or the take-home exam) must be no lower that 15. You will be admitted to the oral presentation only if you pass the written exam.

All the tests must be passed within one exam session, otherwise all the tests will be re-taken within one session.

During the course, a pre-exam will be also available. The pre-exam is a written exam on Game Theory. If you pass the pre-exam (mark no lower than 18), you are exempted from the written exam and you are directly admitted to the oral presentation. However, even if you pass the pre-exam you can decide to take the written exam, but in this case the mark of the pre-exam will expire.

For the oral presentation, follow instructions in the teaching material (Oral presentation - List of papers).

Main reference

Tirole, J. (198). The Theory of Industrial Organisation. MIT University Press.

Readings discussed in class

Andrade de Sá, S. and Daubanes, J. (2016). Limit pricing and the (in)effectiveness of the carbon tax. Journal of Public Economics139, 28-39.

Akerlof, G. (1970). The market for "lemons": Quality uncertainty and the market mechanism. The Quarterly Journal of Economics, 84(3), 488-500.

Davis, L.W. and E. Muehlegger (2010). Do Americans consume too little natural gas? An empirical test of marginal cost pricing. RAND Journal of Economics, 41(4), 791–810.

Dubé, JP (2005). Product Differentiation and Mergers in the Carbonated Soft Drink Industry. Journal of Economics and Management Strategy, 14(4), 879-904.

Duch-Brown N., Grzybowski L., Romahn A., Verboven F. (2017). The impact of online sales on consumers and firms. Evidence from consumer electronics. International Journal of Industrial Organisation, 52(1), 30–62.

Haskel, J. and C. Martin (1994). Capacity and competition: empirical evidence on UK panel. The Journal of Industrial Organisation, 42(1), 23–44.

McDonald, C.G., and V.C. Slawson (2002). Reputation in an internet auction market. Economic Inquiry 40(4), 633-650

Mortimer, J.H. (2007). Price discrimination, copyright law, and technological innovation: Evidence from the introduction of DVDs. The Quarterly Journal of Economics, 122(3), 1307-1350. https://doi.org/10.1162/qjec.122.3.1307

Myerson, R.B. and M. Satterthwaite (1983), Efficient mechanisms for bilateral trading, Journal of Economic Theory, 28, 265-281.

Further readings

Gibbard, A. (1973). Manipulation of voting schemes: A general result. Econometrica, 41, 587-601.

Porter, R.H. (1983). A study of cartel stability: The joint executive committee, 1880-1886. The Bell Journal of Economics, 14(2), 301-314.

Satterthwaite, M. (1975). Strategy-proofness and Arrow’s conditions: Existence and correspondence theorems for voting procedures and social welfare functions. Journal of Economic Theory, 10, 187-217.

Diary of lectures

Lecture 1. Arrow-Debreu economics. Pareto efficiency. Competitive equilibrium. Welfare theorems.

Lecture 2. Asymmetric information and markets failures. The lemons problem (Akerlof, 1970).

Lecture 3. Mechanism implementation. Incentive compatibility. Revelation principle.

Lecture 4. Implementation in dominant strategies. Direct mechanism and dictatorial rule (Gibbard, 1973; Satterthwaite, 1975). Bayesian implementation. A seller interacting with buyer(s) (Myerson and Satterthwaite, 1983).

Lecture 5. Introduction to Auction Theory.

Lecture 6. Introduction to Adverse Selection.

Lecture 7. Demand theory.

Lecture 8. Price discrimination

Lecture 9. An empirical investigation on price discrimination (Mortimer, 2007)

Lecture 10. Marginal cost pricing (Davis and Muehlegger, 2010)

Lecture 11. Courot and Bertrand models (Haskel and Martin, 1994)

Lecture 12. Differentiated products (Duch-Brown et al., 2017)

Lecture 13. Limit pricing (Andrade de Sá and Daubanes, 2016)

Lecture 14-15. Mergers and acuisitions (Dubé, 2005)

Lecture 16-17. Auction markets (McDonald and Slawson, 2002)

Lecture 18. Consumers demand and price elasticities for responsible goods.