Industrial Organization

Professor: Jeff Thurk // jeff.thurk@uga.edu

Meetings: TBD

Office Hours: TBD

Optional Texts
”Industrial Organization: Contemporary Theory and Practise.” Lynne Pepall, Daniel Richards, and George Norman, Thomson, 4th Edition, 2008.
”Industrial Organization in Context.” Stephen Martin. Oxford University Press, 2010.
”Industrial Organization: A Strategic Approach.” Jeffrey Church and Roger Ware, McGraw-Hill, 2001.
”The Antitrust Revolution.” J. Kwoka and L. White, Oxford University Press, 1999.

Semester Schedule

*All readings refer to the book by Pepall, Richards, and Norman.

Topic 1: Review
Review of cost concepts, profit maximization, welfare measurement, monopoly. Antitrust Statutes: Sherman Act, Clayton Act, FTC Act.

Readings: Chapters 2, 4

Lecture Slides: Review

Topic 2: Pricing
First, second, and third degree price discrimination. Two-part tariffs (nonlinear pricing). Multi-product pricing. Bundling and tie-in sales. Two-sided markets

Reading: Chapters 5, 6, 8

Lecture Slides: Pricing

Applications:
DellaVigna, S. and M. Gentzkow (2019) “Uniform Pricing in US Retail Chains.”
Dube, J.P. and S. Misra (2017) “Scalable Price Targeting.”
Adams, B. and K. Williams (2018) “Zone Pricing in Retail Oligopoly.”

FIRST EXAM

Topic 3: Oligopoly in Homogeneous Good Markets

Nash Equilibrium. Quantity vs. price competition. Competition when firms are capacity-constrained.

Readings: Chapters 9, 10.1)

Lecture Slides: Oligopoly Homogeneous Goods

Application:
Genesove, D. and W. Mullin (1998) “Testing Static Oligopoly Models: Conduct and Cost in the Sugar Industry, 1890-1914.”

Topic 4: Oligopoly in Differentiated Good Markets
Nash equilibria with differentiated products. Location models. Empirical models of competition and demand estimation.

Readings: Chapter 10.2

Lecture Slides: Oligopoly Differentiated Goods

Application:
Wollmann, T. (2018) “Trucks without Bailouts: Equilibrium Product Characteristics for Commercial Vehicles.”

Topic 5: Horizontal Mergers
Theory. Markups and measures of market concentration. Antitrust in practice: Concentration Ratios, Herfindahl-Hirschman Index (HHI), and Diversion Ratios.

Readings: Chapter 16

Lecture Slides: Horizontal Mergers

Applications:
Standard Oil of New Jersey vs U.S. (1911)
FTC vs Coca-Cola Bottling Company (1994)
Nevo, A. (2000) “Mergers with Differentiated Products: The Case of the Ready-to-Eat Cereal Industry.”

SECOND EXAM

Topic 6: Cartels and Price Fixing
Dynamic games. Cooperation, collusion, and repeated play.

Readings: Chapters 11, 14, 15

Lecture Slides: Collusion

Applications:
Porter, R. (1983) “A Study of Cartel Stability: The Joint Executive Committee.”
E.I. du Pont and Ethyl Corporation vs FTC (1984)
Lysine price-fixing conspiracy (1997)
UW-Madison Happy Hour Collusion (2005)

Topic 7: Vertical Mergers
Theory. Retail price maintenance. Exclusive territories.

Readings: Chapter 16

Lecture Slides: Vertical Mergers

Applications:
Dr. Miles Medical Company vs John D. Park & Sons Company (1911)
U.S. vs Colgate (1919)
Brown Shoe vs U.S (1962)
AT&T- Time Warner Merger (2018)
Crawford G.; Lee, R.; Whinston, M.; and A. Yurkoglu (2018) “The Welfare Effects Of Vertical Integration In Multichannel Television Markets.”

Topic 8: Entry
Dynamic production and pricing. Strategies to prevent entry

Readings: Chapter 12, 13

Lecture Slides: Market Entry

Applications:
Northeastern Telephone Co. vs AT&T (1981)
Milgrom, P. and J. Roberts (1982) “Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis.”
Porter, Michael (1996) “What is Strategy?” Harvard Business Review.
Matsushita Electric vs. Zenith Radio Corp (1986)
Nalebuff, B. (2004) "Bundling as an Entry Barrier."
Ellison, G. and S.F. Ellison (2011) “Strategic Entry Deterrence and the Behavior of Pharmaceutical Incumbents Prior to Patent Expiration.”
Besanko, D.; Doraszelski, U.; and Y. Kryukov (2014) “The Economics of Predation: What Drives Pricing When There Is Learning-by-Doing?”
Bronnenberg, B.; Dube, J.P.; Gentzkow, M.; and J. Shapiro (2015) "Do Pharmacists Buy Bayer? Informed Shoppers and the Brand Premium."

Topic 9: Innovation and Entrepreneurship
Static vs. dynamic efficiency (Adam Smith vs. Joseph Schumpeter). Patents. R&D under uncertainty and competition. Innovation direction. Joint ventures. Strategic Entry. Venture Capital

Readings: Chapters 22, 23

Lecture Slides: Innovation

Applications:
Griliches, Z. (1957) “Hybrid Corn: An Exploration in the Economics of Technological Change.”
Mansfield, E. (1961) “Technical Change and the Rate of Imitation.”
Seim, K. (2006) “An Empirical Model of Firm Entry with Endogenous Product-type Choices.”
Goettler R. and B. Gordon (2011) “Does AMD Spur Intel to Innovate.”
Gowrisankaran, G. and M. Rysman (2012) “Dynamics of Consumer Demand for New Durable Goods.”
Manuelli, R. and A. Sheshadri (2014) "Frictionless Technology Diffusion: The Case of Tractors."
Igami, M. (2017) “Estimating the Innovator’s Dilemma: Structural Analysis of Creative Destruction in the Hard Disk Drive Industry, 1981–1998.”
Thurk, J. (2019) “Sincerest Form of Flattery? Product Innovation and Imitation in the European Automobile Industry.”

CUMULATIVE FINAL EXAM