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INDUSTRIAL ORGANIZATION

Program

EN IT

Updated A.Y. 2019-2020

INDUSTRIAL ORGANIZATION
European Economy and Business Law & Master of Science in Economics
Academic year 2019 2020
6 CFU


LECTURER 
Prof. Elisabetta Iossa 
Elisabetta.Iossa@uniroma2.it
Office hours: to be agreed by email
Elisabetta Iossa is Professor of Economics at the University of Rome ‘Tor Vergata’, Director of the Research Center in Procurement and Supply Chain, Proxenter (www.proxenter.it) and Research Fellow of the Center for Economic Policy Research (CEPR) in London, and IEFE-Bocconi. She studied in Napoli, University of York and Universitè Libre de Bruxelles, and worked in London at Brunel University for ten years. Her main research interests are in the provision of public services, public procurement and public-private partnerships. she has advised many international institutions such as Competition Commission, Financial Service Authority, Office of Fair Trading, International Fund for Agricultural Development and World Bank. Her main publications and further details are available on https://sites.google.com/site/profelisabettaiossa/

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.

LEARNING OUTCOMES
At the end of the Course student should:
1. be able to understand the logical approach of game theory to study collusive practices among firms in static and dynamic contexts
2. be able to use mathematical tools to analyze mergers effects
3. be able to apply knowledge of game theory to understand the impact of product choice and location on firm’s market power
4. be able to understand how firms may use of brand proliferation to deter entry

ASSESSMENT
The course comprises front lectures and seminars. The assessment method is based 100% on the written exam. EEBL students take the exam at the same time as the exam in Game Theory.

LECTURES


Background Reading         Week 1 (6hrs)
Chp 1. What is 'Markets and Strategies'?
Chp 2. Firms, consumers and the market

Reading: Chp. 1,2.

Part II. Market Power
Chp 3. Static imperfect competition
3.1.1: Standard Bertrand Model
3.1.3: Price Competition with Differentiated Products
(Hotelling model and Salop model)
3.1.4 Asymmetric Competition with Differentiated Products
3.2.1 Cournot Competition
3.3.2. Differentiated products: Cournot vs Bertrand
3.4 Strategic substitutes vs strategic complements
Chp 4. Dynamic aspects of imperfect competition (review from Game Theory course)

Reading: Chp. 3.1.1; 3.1.3; 3.1.4; 3.2.1;3.3.2: 3.3.3;3.4; 4.1.1

           Week 2 (6hrs)
Part III. Sources of Market Power
Chp 5. Product differentiation
5.2.1 A simple location model
5.2.3. The Quadratic Hotelling Model
5.3.1. Vertical product differentiation

Reading: Chp. 5.1.; 5-2-1; 5.2.3. 5.3.1.

Part VI. Theory of Competition Policy: 
Chp 14. Cartels and tacit collusion:
14.1 Formation and stability of cartels
14. 2: Sustainability of Tacit Collusion
14.2.3 Collusion and multimarket contact
14.3: detecting and fighting collusion: leniency programs

          Week 3 (6 hours)
Reading: Chp. 14.1.; 14.1.1; 14.2; 14.2.1; 14.2.2; 14.2.4 (simplified; see slides); 14.2.5 (simplified; see slides); 14.3.1; 14.3.2 (only leniency programs/no maths)

Chp 15. Horizontal mergers     Week 4 (2 hours)
15.1 Profitability of simple Cournot Mergers
15.1.2: Mergers between several firms
15.1.3: Efficiency increasing mergers
15.2: Welfare Analysis of Cournot mergers

Reading: Chp. 15.1.1; 15.1.2; 15.1.3 (no maths); 15.2 (no maths)

Chp 16. Strategic incumbents and entry   Week 4 (3 hours)
Chp 16.3 Strategies Affecting Demand variables:
Brand Proliferation
Bundling
16.4 Limit Pricing under Complete information

Reading: Chp. 16.3.; 16.3.1, 16.3.2; 16.4


Additional Reading
Appendix A. Game theory
Appendix B. Competition policy

ESSENTIAL READING
All above indicated Chapters in Main Textbook
• Belleflamme, Paul and Martin Peits, (2015) Universität Mannheim, Germany Industrial Organization Markets and Strategies, 2nd Edition Cambridge University Press

ADDITIONAL READING FOR VERY INTERESTED STUDENTS

• Motta Massimo (2014), Competition Policy: Theory and Practice, Cambridge University Press.

Book website: all slides and exercises here.
https://www.cambridge.org/it/academic/subjects/economics/industrial-economics/industrial-organization-markets-and-strategies-2nd-edition?format=PB#resources