EC3099 Industrial economics
Prerequisites (applies to degree students only)MN3028 Managerial economics or EC2066 Microeconomics.
Theory of the firm.
Size and structure of firms: the technological view of the firm; the transaction costs-property rights approach; investment specificity, incomplete contracts and vertical integration; empirical evidence.
Separation of ownership and control: separation of ownership and control; managerial incentives; the limits to managerial discretion; foundations of the profit-maximisation hypothesis.
Firm conduct and market structure.
Short-run price competition: the Bertrand model; Bertrand competition with capacity constraints; the Cournot model.
Dynamic price competition: repeated interaction; collusion and cartel stability; theories of price wars; empirical analysis of market power and collusive behaviour.
Entry deterrence and entry accommodation: first-mover advantages and the value of irreversible decisions; strategies to deter entry; strategic substitutability vs. complementarity; a taxonomy of business strategies.
Product differentiation and non-price competition: horizontal product differentiation; brand proliferation and entry deterrence; vertical product differentiation.
Price discrimination: first-degree, second-degree and third-degree price discrimination; non-linear pricing; tie-in sales.
Vertical restraints: efficiency explanations for vertical restraints; vertical and horizontal externalities; vertical restraints as instruments that restrict competition; empirical evidence.
The determinants of market structure: theory of market structure in exogenous and endogenous sunk cost industries; technology and market structure; empirical evidence.
Competition policy and regulation.
Competition and industrial policy: competition policy in the EU, the USA and Japan; current issues in competition policy; industrial policy towards R&D.
Regulation: regulation of firms with market power under symmetric information; regulation under asymmetric information; liberalisation and regulation; empirical evidence.