37297 - Industrial Organization

Learning outcomes

By the end of this course students are able to: - recognize the basic questions, models, and methods asked in industrial organization; - discuss the basic framework of competition policy, as applied to market definition, merger assessment, and anti-competitive behaviors; - analyze market structure, using concentration measures and assessment of an industry’s structural factors; - use basic game theoretic tools to analyze strategic situations; - apply standard economic models to understand firm decisions and strategies.

Course contents

Prerequisites: The course assumes that students are familiar with basic microeconomic models (perfect competition, monopoly) and are comfortable with using algebra and basic calculus (e.g. linear systems of equations, derivatives and partial derivatives, optimization problems in one and two variables).

Content: This course provides a comprehensive understanding of firm behavior and strategy through the lens of Industrial Organization, focusing on pricing, market equilibrium, innovation, and investment decisions. Students will develop the ability to apply game theory and economic models to analyze competitive dynamics and strategic interactions, while gaining insights into agency theory and incentive structures within firms. Emphasis is placed on the tools and methods used to assess market structure and concentration, as well as on the principles of competition policy, including market definition, merger control, and anti-competitive practices. By the end of the course, students will be equipped to critically evaluate firm strategies and market outcomes using both theoretical frameworks and practical applications.

Structure of the course:

1 Key concepts in industrial organization

2 Recap of basic microeconomics

3 Measuring market structure and market power

4 Price discrimination

5 Commodity bundling and tie-in sales

6 Product differentiation

7 Recap of game theory: simultaneous and sequential games

8 Theories of Oligopoly: Bertrand and Cournot competition

9 Competition policy

10 Entry Deterrence, Predation, and Abuse of Dominance

11 Collusion

12 Horizontal Mergers and Merger Policy

Readings/Bibliography

The main textbook for the course is:

- Pepall, Richards, Norman, Industrial Organization: Contemporary Theory and Empirical Applications (5^th edition)

We will be covering this book closely in class, so it is strongly recommended in order to understand the class material.

The lectures will also utilize material from:

- L. Cabral, Introduction to Industrial Organization, 2017, second edition, MIT Press.

Additional teaching material (lecture slides, exercises, articles and case studies) will be made available through the Virtuale platform.

Teaching methods

The main instructional approaches used in the course are:

- Lectures and in-class practice exercises.

Assessment methods

Class attendance and participation (also in home assignments) is strongly encouraged.

Students completing home assignments on time:

- Midterm Exam 50%

- Final Exam 50%

- Home Assignments Bonus

Students who do not complete home assignments on time:

- Final Exam 100%

 

- Midterm/final structure:

All exams are written, and consist of a mix of exercises, multiple choice, and open questions, lasting approximately 60–90 minutes. The number of questions of each type is not determined in advance. The evaluation of exercises depends on providing correct answers. For instance, if asked to calculate an HHI, the students should do so correctly. For written answers, grading is based on accuracy and concision. Incorrect or irrelevant statements will be penalized.

Students can choose between a single general exam (roughly in January, February, or September) or two partial midterms (one around the end of October and one in January or February). Each partial exam is graded out of 16, and students must score at least 9/16 in the first midterm to access the second. The final grade is the sum of both midterm scores (out of 32; a score greater than 30 will be graded as 30 e lode).

Students can also gain bonus points towards their final grade by successfully completing home assignments.

- Exam policy:

Registration on Almaesami is mandatory for all exam sessions. Failing to register on time may preclude entrance to the exam. Registration for midterm exams is open only to students that successfully complete home assignments on schedule.

All exams are written, closed book, and will be carried out on paper (not computer). Students may use handheld calculators, as long as they are not able to connect to the internet. Use of Artifical Intelligence tools in exams is strictly prohibited. AI may be used to complete home assignments.

One opportunity is given to reject the final grade by completing the instructors’ online form within the deadline (email requests will not be accepted unless stated). Students will be given an opportunity to review their exam script (in person) and ask questions about the exam before the deadline.

Grading scale:

< 18: failed

18-23: sufficient

24-27: good

28-30: very good

30 e lode: outstanding

At most 30 Exchange students, and 10 UADE students, selected in chronological order, will be admitted to the course and the exam.

Students with learning disorders and\or temporary or permanent disabilities should contact the office responsible ( https://site.unibo.it/studenti-con-disabilita-e-dsa/en/for-students ) as soon as possible so that they can propose acceptable adjustments. Any requests for adaptation must be submitted (in conjunction with the DSA) to the lecturer at least 15 days before the exam date.

Teaching tools

Tools, platforms, or resources used during the course:

- Learning platform: Virtuale (virtuale.unibo.it) contains slides, exercises, additional readings (such as antitrust cases, more challenging exercises).

- Presentation software: PowerPoint and/or pdf

- Communication tools: Email and Forum on Virtuale

Office hours

See the website of Jonathan Neil Chapman

See the website of Elena Argentesi