The course gives a graduate level presentation of Industrial
Organization. We will discuss both theoretical models and empirical
applications. I will assume that students are familiar with fundamentals of microeconomic
theory, game theory and econometrics. The main text for the course is Jean
Tirole, The Theory of Industrial
Organization, (Cambridge: MIT Press, 1988). In addition to the text, a
relatively large number of journal articles are assigned each week. The grade
in this course will be assigned on the basis a midterm, a final exam and
in-class presentations.
READINGS
Read carefully the articles in bold before each
class meeting!!! You may skim through the other articles, but it is best if you
also read them carefully. Follow the links below to download the articles from various
electronic sources (do this either from school, or if you’re at home use the
library proxy server).
Journals:
HIO
= Handbook of IO, RJE = Rand Journal of Economics, ECON = Econometrica,
JPE = Journal of Political Economy, AER = American Economic Review, BJE = Bell
Journal of Economics (currently RJE), JET = Journal of Economic Theory, REStud = Review of Economic Studies, JIE = Journal of
Industrial Economics, QJE = Quarterly Journal of Economics, IJIO = Int’l
Journal of IO, EL = Economics Letters, REStat =
Review of Economics and Statistics, JEMS = Journal of Economics and Management
Strategy, JMR = Journal of Marketing Research
Class schedule
Week 1.
Theory of the Firm
Week 2.
Monopoly Pricing and Durable Goods
- Tirole, Ch. 1
- F. Gul, H. Sonnenschein, and R.
Wilson, "Foundations of Dynamic Monopoly and the Coase
Conjecture," JET 39, pp. 155-190. (Not available online,
but I’ll have a hard copy ready one
week before class)
- D. Fudenberg and J. Tirole,
"Upgrades,
Trade-ins, and Buybacks," RJE 29, pp. 235-258.
Week 3.
Price Discrimination
- Tirole, Ch. 3
- K. Corts, "Third
Degree Price Discrimination in Oligopoly: All-Out Competition and
Strategic Commitment," RJE 29, pp. 306-323.
- M. Perry, "Forward
Integration by ALCOA: 1888-1930," JIE 29, pp. 37-53.
- E. Maskin and J. Riley, "Monopoly
with Incomplete Information," RJE 15, pp. 171-96.
- RP McAfee, J. McMillan, and M. Whinston,
"Multiproduct Monopoly, Commodity Bundling, and Correlation
of Values," QJE 104, pp. 371-83.
- S. Borenstein and N. Rose, "Competition and Price Dispersion in
the U.S. Airline Industry," JPE 102, pp. 653-683.
- A. Shepard, "Price Discrimination and Retail
Configuration," JPE 99, pp. 30-53.
- K. Graddy, "Testing
for Imperfect Competition at the Fulton Fish Market," RJE 26, pp.
75-91.
Week 4.
Static Competition and Models of Differentiation
Week 5.
Search
Week 6.
Dynamic Competition
Week 7.
Empirical Models of Demand
- D. Epple, "Hedonic
Prices and Implicit Markets: Estimating Demand and Supply Functions for
Differentiated Products" JPE 95, pp. 59-80.
- R. Palmquist, "Estimating
Demand for the Characteristics of Housing," REStat
66, pp. 394-404.
- S.
Berry,
"Estimating Discrete-Choice Models of
Product Differentiation" RJE
25 (2), pp. 242-262.
- S.
Berry, J. Levinsohn, and A. Pakes,
"Automobile Prices in Market
Equilibrium" ECON 63, pp.
841-890.
- A. Nevo, "A
Practitioner’s Guide to Estimation of Random Coefficients Logit Models for Demand” JEMS 9 (4), pp. 513-548.
- P. Goldberg, "Product Differentiation and Oligopoly
in International Markets: The Case of the U.S. Automobile Industry" ECON 63, pp. 891-952.
Week 8.
Entry
Week 9.
Strategic Investment
- Tirole
Ch.
8
- K. Judd,
"Credible
Spatial Preemption" RJE 16, pp. 153-166.
- P. Aghion and P. Bolton,
"Entry
Prevention through Contracts with Customers," AER 77, pp.
388-401.
- J. Chevalier,
"Capital Structure and Product Market
Competition: Empirical Evidence from the Supermarket Industry " AER 85 (3), pp. 415-435.
- Kadiyali,
V., "Entry, its Deterrence, and its
Accommodation: A Study of the U.S. Photographic Film Industry"
RJE 27, pp. 452-478.
- R. Smiley, "Empirical Evidence on Strategic
Entry Deterrence" IJIO 6, pp. 167-180
Week 10.
Asymmetric Information
- Tirole,
Sections 9.0-9.7.
- J. Ordover and G. Saloner, "Predation, Monopolization and
Antitrust," HIO ((The Handbook of Industrial Organization, R. Schmalensee and R. Willig,
eds., North-Holland: 1989)
- P. Milgrom and J. Roberts,
"Limit
Pricing and Entry Under Incomplete Information:
An Equilibrium Analysis," ECON 50, pp. 443-460.
- M. Doyle and C.
Snyder, "Information Sharing and Competition in
the Motor Vehicle Industry"
JPE 107 (6) (December 1999), pp. 1326-1364.
- D. Genesove, "Adverse Selection in the Wholesale
Used Car Market" JPE 101
(August 1993), pp. 644-665.
- T. Hubbard, "An Empirical Examination of Moral
Hazard in the Vehicle Inspection Market" RJE 29, pp.
406-426.
Week 11.
Advertising
Week 12.
Auctions
- R.P. McAfee
and J. McMillan, "Auctions
and Bidding" JEL, Jun 1987, pp. 699-738.
- K. Hendricks and R. Porter, "An Empirical Study of an Auction with
Asymmetric Information" AER Dec 1988, pp. 865-83.
- P. Bajari, "Econometrics of the First Price Auction
with Asymmetric Bidders" mimeo – copies will
be available one week ahead of class.
- J.-J. Laffont, H. Ossard, and Q. Vuong, "Econometrics
of First Price Auctions," ECON Jul 1995, pp. 953-80.
Week 13.
Patents
- Tirole,
Sections 10.1-10.5, 8.1.3.
- M. Kremer, "Patent Buy-outs: A Mechanism for
Encouraging Innovation" QJE Nov 1998, pp. 1137-1167.
- J. Bessen and E. Maskin, "Sequential
Innovation, Patents, and Imitation," mimeo.
- H. Hopenhayn and M. Mitchell, "Innovation, Variety,
and Patent Breadth," RJE 32, pp. 152-166.
- A. Pakes, "Patents as Options: Some Estimates of
the Value of Holding European Patent Stocks," ECON 54, pp. 755-784.
Week 14.
Managerial Incentives
- Tirole,
pp. 34-55.
- B. Holmstrom,
"Managerial Incentive Problems--A
Dynamic Perspective" REStud
66, pp. 169-182.
- C. Fershtman and K. Judd, "Equilibrium
Incentives in Oligopoly," AER 77, pp. 927-940.
- R. Masson, "Executive
Motivation, Earnings, and Consequent Equity Performance," JPE 79,
Dec 1971, pp. 1278-1292.
- J. Chevalier and G.
Ellison, "Career Concerns of Mutual Fund
Managers" QJE 114, pp.
389-432.