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INDUSTRIAL ORGANIZATION

Syllabus

EN IT

Learning Objectives

LEARNING OUTCOMES: the aim of this course is to introduce students to strategic reasoning through a formal training in game theory and a parallel set of lectures on applications to competition policy. Specifically, we will formally introduce the basic ingredients of non cooperative games and a number of equilibrium concepts used to solve them. These will be applied to studying strategic interaction among firms and to design incentive schemes to achieve a number of basic public policy goals.

KNOWLEDGE AND UNDERSTANDING:
At the end of the Course students should be able to understand and apply the logical approach of game theory to analyse the strategic environment that firms face in regime of oligopoly. In particular, we will study anti-competitive conducts put forth by firms and public policies to address them.

APPLYING KNOWLEDGE AND UNDERSTANDING:
At the end of the Course students should be able to apply the knowledge to identify potential anti-competitive practices.

MAKING JUDGEMENTS:
Given a firm's conduct, the student should be able to (i) sketch its overall impact on economic surplus and its redistributive impact on the individual surplus of the parties involved and (ii) suggest potential interventions.

COMMUNICATION SKILLS:
At the end of the course students should be able to analyse market practices and prepare presentations to discuss their effects on competition.

Prerequisites

Game Theory (first part of the course)

Program

This course aims at providing a theoretical and practical understanding of main
issues in
industrial organization and competition policy. Using basic concepts in game theory, the
course studies the strategic interaction among firms in imperfectly competitive markets, the
sources of market power, and rationale and impact of competition policy. Lectures will
make use of analytical tools; practical examples will be provided throughout. A number of
case studies are discussed.
Course program by topic:
Week 1:
What are markets, market power and strategies?
Firms, consumers and the market
Theory of a monopoly

Week 2:
Standard Bertrand Model
Cournot Competition
Stackelberg model

Week 3
Theory of Competition Policy
Cartels and tacit collusion
Sustainability of Tacit Collusion
Collusion and multimarket contact
Detecting and fighting collusion: leniency programs


Week 4
Product differentiation
Horizontal product differentiation
A simple Hotelling location model
Vertical product differentiation

Week 5
Mergers and vertical supply chains
Horizontal mergers
Vertical relations

Week 6
Strategic incumbents and entry
Brand Proliferation
Bundling
Predatory pricing
Other forms of entry deterrence

Additionally, weekly tutorials a provided to help with the problem sets and learning the
material.

Books

Cabral Luis M. B. (2017). Introduction to Industrial Organization, 2nd Edition, MIT
Press, Cambridge, MA.

Bibliography

Belleflamme, Paul and Martin Peitz, (2015). Industrial
Organization Markets and Strategies, 2nd Edition, Cambridge University Press.

Motta Massimo (2014), Competition Policy: Theory and Practice, Cambridge University
Press.
website: slides ed esercizi
https://www.cambridge.org/it/academic/subjects/economics/industrial-economics/industrial-
organization-markets-and-strategies-2nd-edition?format=PB#resources

Teaching methods

NEW: The course consists of lectures and exercise sessions.

OLD:The course comprises lectures and seminars.

Exam Rules

The students are evaluated using a written exam. It is composed of two types of questions.
The first type tests the student's understanding of the theoretical material that the students
are expected to answer with short essays. A third of the total available points come from this
part. The second type of questions test the the student's ability to apply and interpret formal
mathematical models of competition. In these questions the students are asked to apply the
techniques covered in the course to solve and analyze formal models and discuss their
results. Students can supplement a maximum of 30% of their exam score by solving weekly
problem sets.

The grading is as follows:
Fail: major deficiencies and/or inaccuracies in knowledge and understanding of topics;
limited ability to analyze, apply and synthesize.
o 18-20: Barely sufficient knowledge and understanding of topics with possible
imperfections; basic understanding of models of competition with limited ability to solve
applied problems.
o 21-23: Routine knowledge and understanding of topics; Correct analysis and synthesis
skills with coherent logical argumentation and some ability to solve applied problems.
o 24-26: Fair knowledge and understanding of topics; Good analytical and synthesis skills
with rigorously expressed arguments and good ability to make connections and apply the
course material.
o 27-29: Comprehensive knowledge and understanding of topics; Remarkable skills of
analysis, synthesis. Very good ability to independently make connections and apply learnt
material.
o 30-30L: Excellent level of knowledge and understanding of topics. Remarkable analytical
and synthesis skills and independent ability to apply and make connections within the course
material. Arguments expressed in an original way.