Industrial Economics; Competition, Strategy and Policy
Module Code: EC3071
Module Title: Industrial Economics; Competition, Strategy and Policy
- ECTS Weighting: 10
- Semester/Term Taught: Michaelmas + Hilary Term
- Contact Hours: 44 hours of lectures and 10 hours of tutorials
- Module Personnel: Lecturer - Paul Gorecki / Lecturer - Ms Orla Lane
- Module Handout:EC3071 Handout 2013-2014
Module Overview
Markets with a small number of interdependent sellers provide the setting for Industrial Economics: Competition, Strategy and Policy. This module stresses the importance of the role of game theory in the analysis of such markets and provides a forum for students to move beyond a two-dimensional (price and quantity) evaluation of market performance. The following topics are likely to be covered in the module: welfare economics and consumer surplus, competition, monopoly, contestability and barriers to entry; oligopoly and non-co-operative game theory: Cournot, Bertrand and Stackelberg; vertical agreements; monopolistic competition and product differentiation; price discrimination; predation; research and development; and, advertising. Students are strongly advised to review their EC2010 notes on microeconomics and EC1030 notes on mathematics (or equivalents) as familiarity with material from these modules is assumed.
Recommended Reading List
There is no core module textbook. However, students should have fairly regular access to one of the following textbooks or their equivalents: Martin, S., Industrial Organisation in Context, Oxford University Press, 2010 or Carlton, D and J. Perloff, Modern Industrial Organization, Pearson: Addison-Wesley, 4th edition, 2005. Very many substitute textbooks exist and students are encouraged to browse on a regular basis.
In addition, the following two books contain interesting competition policy case studies:
J. Kwoka & L. White (eds.), The Antitrust Revolution: Economics, Competition and Policy, Fifth Edition, Oxford University Press, 2009; and
B. Lyons (ed.), Cases in European Competition Policy: The Economic Analysis, Cambridge University Press, 2009.
1. Module Overview
Martin, Chapter 1.
Coase, R. H., "The Institutional Structure of Production", American Economic Review, Vol.82, No.4, September 1992, pp.713-19.
2. Welfare Economics Review/Overview
Farrell, J., “Information and the Coase Theorem”, Journal of Economic Perspectives, Vol.1, No.2, Fall 1987, pp. 113-29.
Just, R., Hueth, D & A. Schmitz, The Welfare Economics of Public Policy: A Practical Approach to Project and Policy Evaluation, Edward Elgar, 2004.
Willig, R., "Consumer Surplus Without Apology", American Economic Review, Vol.66, No.4, September 1976, pp.589-97.
3. Competition, Monopoly and Contestability
Carlton and Perloff, Chapters 3 and 4.
Martin, Chapter 2.
Baumol, W., "Contestable Markets: An Uprising in the Theory of Industry Structure", American Economic Review, Vol.72, No.1, March 1982, pp.1-15.
Cowling, K & D. Mueller, "The Social Costs of Monopoly Power", Economic Journal, Vol.88, December 1978, pp.727-48.
Gilbert, R., "The Role of Potential Competition in Industrial Organization", Journal of Economic Perspective, Vol.3, No.3, Summer 1989, pp.107-27.
Leibenstein, H., "Allocative Efficiency vs " X-Efficiency"", American Economic Review, Vol.56, June 1966, pp.392-415.
Littlechild, S. C., "Misleading Calculations of the Social Costs of Monopoly Power", Economic Journal, Vol.91, June 1981, pp.348-63.
Loeb, M & W. Magat, "A Decentralized Method for Utility Regulation", Journal of Law & Economics, Vol.22, 1979, pp.399-404.
Posner, R., "The Social Costs of Monopoly and Regulation", Journal of Political Economy, Vol.83, No.4, 1975, pp.807-27.
Schwartz, M & R. Reynolds, "Contestable Markets: An Uprising in the Theory of Industry Structure: Comment", American Economic Review, Vol.73, No.3, June 1983, pp.488-96.
Tullock, G., "The Welfare Costs of Tariffs, Monopolies and Theft", Western Economic Journal, June 1967, pp.224-232.
4. Oligopoly Theory: Cournot and Bertrand Competition
Carlton and Perloff, Chapter 6.
Martin, Chapters 3 and 5.
Shapiro, C., Theories of Oligopoly Behavior, Handbook of Industrial Organisation, Volume 1 (Chapter 6), 1989 (especially pp.330-56).
Sutton, J., "Explaining Everything, Explaining Nothing", European Economic Review, Vol.34, 1990, pp.503-12.
5. Introduction to Competition Policy: Horizontal and Vertical Agreements
Carlton and Perloff, Chapter 12.
Martin, Chapters 6, 11, 12, 18, 19, 22 and 24.
Brennan, T., “”Vertical” excuses for horizontal practices: should there be any per se antitrust rules?”, The Antitrust Bulletin, Summer 2000, pp.467-90.
Kovacic, W & C. Shapiro, “Antitrust Policy: A Century of Economic and Legal Thinking”, Journal of Economic Perspectives, Vol.14, No.1, Winter 2000, pp.43-60.
Symposia, Horizontal Mergers and Antitrust, Journal of Economic Perspectives, Vol.1, No.2, Fall 1987, pp.3-54.
Module Pre Requisite
EC2010
Assessment Details
A project to be submitted by the end of Michaelmas Term (i.e. 4pm, Friday 13th December 2013) will account for 15% of your overall grade. A second assignment (to be decided by Orla Lane will also account for 15% of your overall grade. The penalty for late submission is 100 per cent; there will of course be no penalty imposed on late submission provided that there is an appropriate medical certificate (or equivalent). The final exam will account for the remaining 70% of your overall grade. In the final examination, students must answer two questions (from four) based on the material covered during the first term and two questions (from four) based on the material covered during the second term.
Classes
Classes (approximately fortnightly) will address problems/material assigned in lectures and case studies. Dates, subject to change, are as follows: 15/10; 22/10; 12/11; 19/11; 26/11; 3/12; and 10/12.
Module Website
Blackboard