everything.study
14.20

Industrial Organization: Competitive Strategy and Public Policy

4-0-8 units. HASS-S · Undergraduate

Analyzes the current debate over the rise of monopolies, the strategic behavior and performance of firms in imperfectly competitive markets, and the role of competition policy. Topics include monopoly power; pricing, product choice, and innovation decisions by firms in oligopoly markets; static and dynamic measurement of market performance; and incentives in organizations. Requires regular participation in class discussion and teamwork in a competitive strategy game. Students taking graduate version complete additional assignments.

Spring 2003 · Industrial Organization and Public Policy

Topics

  • Overview & Review
  • Recitation: Regression Basics
  • Monopoly & Dominant Firms
  • Game Theory 1: Static Models
  • Recitation: Competitive Strategy Game
  • Game Theory II: Dynamic Games
  • Recitation: Dynamic Games
  • Tacit Collusion: GE-Westinghouse HBS Case
  • Facilitating Practices & Cartel Introduction
  • Cartels & Price-fixing; Antitrust Law
  • Antitrust Policy: Mergers & Monopolization
  • Recitation: Cartels
  • Measuring Market Power
  • Oligopoly Pricing Strategies I
  • Oligopoly Pricing Strategies II
  • Oligopoly Pricing Strategies III
  • Entry
  • Recitation
  • Entry Deterrence
  • Predatory Pricing
  • Raising Rivals’ Costs
  • Product Choice 1: Spatial Models & Cereal
  • Recitation: Spatial Competition Models; PS 3
  • Product Choice 2: Quality, Durability & Networks
  • Advertising
  • R&D
  • Internal Organization 1: Firm Boundaries
  • Internal Organization 2: Firm Behavior
  • Recitation: CSG Debriefing
  • Vertical Structure
  • Industry Discussion

Readings

  • The course will rely heavily on the required textbook: Jeffrey Church and Roger Ware, Industrial Organization: A Strategic Approach (Irwin McGraw-Hill, 2000, 1st edition). ISBN: 0071166459. The text is denoted on the reading list as “C&W.” Occasional additional readings (typically short news articles) may be handed out in the lecture preceding their discussion. Students are encouraged to scan the Wall Street Journal, Financial Times , business section of The New York Times , or The Economist magazine for articles relevant to the topics covered in the course.
    Listed reading
  • LEC #: 1 · TOPICS: Overview & Review · READINGS: Overview of Course and Review of Basic Microeconomics C&W, Chap. 1, 2, 3.1
    Reading assignment
  • LEC #: 3 · TOPICS: Monopoly & Dominant Firms · READINGS: Monopoly and Dominant Firms C&W, Chap. 4
    Reading assignment
  • “Hard Profits: A Cement Titan in Mexico Thrives by Selling to the Poor—Cemex’s Huge Market Share Lets It Keep Prices High, Expand Around the Globe.” Wall Street Journal (April 22, 2002): A1.
    Listed reading
  • LEC #: 4 · TOPICS: Game Theory 1: Static Models · READINGS: Game Theory Introduction C&W, Chap. 7
    Reading assignment
  • LEC #: 7 · TOPICS: Game Theory II: Dynamic Games · READINGS: Non-cooperative Oligopoly: Dynamic Models C&W, Chap. 9, 10.3-10.4
    Reading assignment
  • LEC #: 9 · TOPICS: Tacit Collusion: GE-Westinghouse HBS Case · READINGS: Cooperative Oligopoly and Tacit Collusion C&W, Chap. 10 (remainder)
    Reading assignment
  • LEC #: 10 · TOPICS: Facilitating Practices & Cartel Introduction · READINGS: Cartels & Price-fixing C&W, appendix (antitrust)
    Reading assignment
  • Salpukas, A. “An Oil Outsider Revives a Cartel.” New York Times, Sunday, Oct. 24, 1999, Sec. 3, p. 1.
    Listed reading
  • LEC #: 12 · TOPICS: Cartels & Price-fixing; Antitrust Law · READINGS: Cartels & Price-fixing C&W, appendix (antitrust)
    Reading assignment
  • LEC #: 13 · TOPICS: Antitrust Policy: Mergers & Monopolization · READINGS: Horizontal Antitrust Policy- Mergers, Alliances, and Joint Ventures C&W, Chap. 23, 19 (skim)
    Reading assignment
  • U.S. Council of Economic Advisors. “Realizing Gains from Competition.” Chap. 3 in The Economic Report of the President. January 2002, pp. 99-143. (this reads quickly!).
    Listed reading
  • “Oligopolies are on the Rise as the Urge to Merge Grows.” Wall Street Journal (February 25, 2002): A1.
    Listed reading
  • Airline response: Done, Kevin. “US airlines on collision course with regulators.” Financial Times, Jan. 21, 2003.
    Listed reading
  • LEC #: 15 · TOPICS: Measuring Market Power · READINGS: Measuring Market Power C&W, Chap. 12
    Reading assignment
  • LEC #: 16 · TOPICS: Oligopoly Pricing Strategies I · READINGS: Strategic Behavior in Oligopoly Markets (Overview) C&W, Chap. 13
    Reading assignment
  • Nintendo in Europe: See the European Commission Ruling & Press Release, 30 October 2002.
    Listed reading
  • Priceline: “How to Beat Priceline.” Wall Street Journal (April 9, 2002): D1.
    Listed reading
  • Internet Pricing and Search: Ellison, Glenn, and Sara Ellison. “Search, Obfuscation, and Price Elasticities on the Internet.” MIT mimeo, 2001.
    Listed reading
  • LEC #: 18 · TOPICS: Oligopoly Pricing Strategies II · READINGS: Pricing and Price Discrimination C&W, Chap. 5
    Reading assignment
  • LEC #: 20 · TOPICS: Oligopoly Pricing Strategies III · READINGS: Pricing and Price Discrimination C&W, Chap. 5
    Reading assignment
  • Internet pricing and search: Ellison, Glenn, and Sara Ellison. “Search, Obfuscation, and Price Elasticities on the Internet.” MIT mimeo, 2001.
    Listed reading
  • LEC #: 21 · TOPICS: Entry · READINGS: Entry, Entry Deterrence C&W, Chap. 14, 15, 16.1
    Reading assignment
  • Ghemawat, Pankaj. “Capacity Expansion in the Titanium Dioxide Industry.” Journal of Industrial Economics 33, 2 (December 1984): 145-63.
    Listed reading
  • LEC #: 23 · TOPICS: Entry Deterrence · READINGS: Entry, Entry Deterrence C&W, Chap. 14, 15, 16.1
    Reading assignment
  • LEC #: 24 · TOPICS: Predatory Pricing · READINGS: Predation C&W, Chap. 21
    Reading assignment
  • U.S. v. American Airlines, Memorandum and Order, April 27, 2001; Brief for Appellant, January 11, 2002. See also Complaint, May 13, 1999.
    Listed reading
  • LEC #: 26 · TOPICS: Raising Rivals’ Costs · READINGS: Raising Rivals’ Cost C&W, Chap. 20
    Reading assignment
  • LEC #: 27 · TOPICS: Product Choice 1: Spatial Models & Cereal · READINGS: Product Choice and Differentiation C&W, 11 (differentiation), Chap. 4.3 (durability), 6 (quality), 16.2 (switching costs)
    Reading assignment
  • (Background, optional): Nevo, Aviv. “Measuring Market Power in the Ready-to-Eat Cereal Industry.” Econometrica 69 (March 2001): 307-342. [Available on-line from Proquest]
    Listed reading
  • “Chrysler Unveils New Warranty Deal.” Detroit Free Press, July 7, 2002.
    Listed reading
  • LEC #: 29 · TOPICS: Product Choice 2: Quality, Durability & Networks · READINGS: Product Choice and Differentiation C&W, 11 (differentiation), Chap. 4.3 (durability), 6 (quality), 16.2 (switching costs)
    Reading assignment
  • LEC #: 31 · TOPICS: Advertising · READINGS: Advertising C&W, Chap. 17
    Reading assignment
  • “Cigarette Makers in Discount War to Lock in Share.” Wall Street Journal (September 23, 1998): B1.
    Listed reading
  • LEC #: 32 · TOPICS: R&D · READINGS: R&D C&W, Chap. 18
    Reading assignment
  • “Leading the News: Drug Study Finds Little Innovation.” Wall Street Journal (May 29, 2002): A3.
    Listed reading
  • LEC #: 34 · TOPICS: Internal Organization 1: Firm Boundaries · READINGS: Internal Organization and Theory of the Firm C&W, Chap. 3.2-3.4
    Reading assignment
  • LEC #: 35 · TOPICS: Internal Organization 2: Firm Behavior · READINGS: Internal Organization and Theory of the Firm C&W, Chap. 3.2-3.4
    Reading assignment
  • LEC #: 37 · TOPICS: Vertical Structure · READINGS: Vertical Integration and Other Vertical Structures C&W, Chap. 16.3-16.4, 22
    Reading assignment
  • “Big Tooth? Suit Says Dentsply has a Monopoly.” Wall Street Journal (April 12, 2002): A13.
    Listed reading

Prerequisites & course information

Subject meets with 14.200 Prereq: 14.01 U (Spring) 4-0-8 units. HASS-S

Sources