02528 - Industrial Economics

Learning outcomes

During the first part of the course, the student will be able to analyse and understand a lot of economic key concepts:  market structures (perfect competition, natural monopoly, contestable markets etc..); barrier to entry: what kind of enrtry deterrence could exist in a specific market; the main organisations model adopted by companies and the choice between market and hierarchy; vertical integration and vertical restriction; the main aspect of regulation and the second best price setting methods (cost plus and price cap). 

In the second part of the course, the studen can learn the main aspects of energy markets; he will be able to analyse the main driver of energy demand; he will know the main energy trend for the long term and the potentiuality of the nuclear option. During the course, it will be introduced also the issue of climate change and the difficult path of Kyoto protocol, followed by the disappointing outcome of Copenaghen Conference (december 2009). In addition, the student will know the potentiality and limits of new renewable sources.  

Course contents

1.      From the Theory of the Firm to the New Industrial Organization: The Marshall's theory of the firm vs General Equilibrium Economics (Walras, Pareto); the Industrial Organization: the Structure-Conduct-Performance Paradigm (SCP) and its limits. The new Industrial Organization currents and the related developments. Brief history of the industrial policies: from the common market to the United States of Europe?

2.      Between Market and Hierarchy: The Coase theory. The transaction costs: origin, key determinants, main transaction's aspects (asset specificity: uncertainty; frequency). Transaction costs and organization models. Transaction costs and theory of the firm.

3.      Size, Efficiency, Market: The cost analysis.  Cost functions in the short term: marginal cost analysis and the new cost-output analysis. Economies of scale: definition, origin, typology, related effects. From Fordism to flexible specialisation; decentralisation and productive delocalisation. Business size and Antitrust.   

4.      Market Failures: definition, typology. Externalities: the negative externalities, their possible solutions and the Coase theorem; positive externalities. The commons and merit goods. Information asymmetry.  

5.      Natural Monopoly and Contestable Markets. Natural Monopoly: from classic to neoclassic definitions; natural monopoly as a market failure; the subadditive cost function; public policies. Contestable markets: a new paradigm, definition and base conditions; the efficiency in the contestable markets; limits of this ideal market structure. Public policies to create the conditions of a contestable market: competition “for the field” and “within the field”.

 6.      Vertical Integration: Definition and typology: The vertical integration determinants: technical economies; coordination economies; transactional economies.  Vertical integration during industry life cycle.

7.      Vertical Restrictions: Definition. Vertical restrictions objectives: decreasing uncertainty; solving externalities. Analysis of a different kind of vertical restrictions: resale price maintenance, exclusive agreement, tie-in-sales, full line forcing etc. Free-riding among producers. The vertical restriction effects. Antitrust policies on this solutions: the European  antitrust policy; the US antitrust policy. 

8.      Barriers to Entry: Definitions. Structural conditions: cost adavnatges; economies of scale; brand loyalty. Strategic barriers: production capacity surplus in respect of market demands; product proliferation; predatory pricing and other predatory practices. Regulatory barriers. Barriers to entry and public policies.

9.      Towards a new economic framework: a different State's rule. Liberalisation and deregulation: reasons and success conditions; the significance of the structure; deregulation. Privatisation: an irreversible process; definition, reasons, objectives; the Italian case.

10.  Regulation: Definition, objectives, typology. The independent Authorities:  the independence and professional competence preconditions; objectives and field of action. Regulation theories: the public interest theory; the private interest theory; the capture theory. The public service between monopoly and competition. Market failures and regulation failures. The price setting process: second best solutions (cost of service regulation, incentive regulation)..

The Energy Rebus

1.      World energy prospectives. The growth of energy demand in the medium-long term; the drivers of the growth; the uncertain conditions on the supply side.

2.      Environmental prospective: the climate change issue; the difficut path toward Kyoto

3.      The main constraints to energy investment. Above ground and below ground factors.

4.      Limits to hydrocarbon developments: the difficult reserve access; the oil scarcity fears; the difficulty of new discoveries; financial logics prevails on strategic decisions.

7.      Renewable energy: potentiality and limits.

8.      Energy security: multidimensional aspect of Energy security: common good and political issue..

9.      The European energy framework.

10.      Liberalisation and concentration processes in energy markets.

11.  Hydrocarbons price scenarios.

Chapters V and VI excluded.

Nuclear industry

1. The uncertain future of the world nuclear sector

2. The Italian case

3. The ambiguity of nuclear renaissance

Examination: WRITTEN

Texts:

Clô A., (2005), Appunti di Economia Industriale, 3° edizione, Bologna: du. press.

Clô A., (2008), Il Rebus Energetico, Bologna: Editrice Il Mulino.

Clô A., (2010), Si fa presto a dire il Nucleare, Bologna: Editrice Il Mulino

 

Readings/Bibliography

Texts:

Clô A., (2005), Appunti di Economia Industriale, 3° edizione, Bologna: du. press.

Clô A., (2008), Il Rebus Energetico, Bologna: Editrice Il Mulino.

Clô A., (2010), Si fa presto a dire nucleare, Editrice il Mulino

Teaching methods

Frontal lessons

Assessment methods

Written examination

Teaching tools

Frontal lessons

Office hours

See the website of Alberto Clò