Industrial organization

Teacher(s)

Belleflamme Paul;

Language

English

Prerequisites

The prerequisite(s) for this Teaching Unit (Unité d’enseignement – UE) for the programmes/courses that offer this Teaching Unit are specified at the end of this sheet.

Main themes

Industrial organization is the study of firms and markets. It focuses on firm behavior in imperfectly competitive markets. Such markets appear to be far more common than the perfectly competitive markets that were the focus of your basic microeconomics course. Imperfectly competitive markets are characterized by strategic interaction among firms: firms' profits depend on the combination of the decisions taken by all firms on the market. Therefore, firms must take this interdependence into account when they make their decisions. In such contexts, we want to understand how firms acquire and use market power. We also want to shed light on government competition policy. This subject will be approached from both theoretical and applied perspectives.

Aims

At the end of this learning unit, the student is able to :
1	At the end of the course, students should (i) have a deep knowledge of the basic models of oligopoly theory, (ii) understand how or why oligopolistic firms manage to exert market power, (iii) understand how governments design and apply competition policy, (iv) apply all these concepts to real-life situations.

Content

Course description
Industrial organization is the study of firms and markets. It focuses on firms’ behavior in imperfectly competitive markets. Such markets appear to be far more common than the perfectly competitive markets that were the focus of your basic microeconomics course. Imperfectly competitive markets are characterized by strategic interaction among firms: firms’ profits depend on the combination of the decisions taken by all firms on the market. Therefore, firms must take this interdependence into account when they make their decisions. In such contexts, we want to understand how firms acquire and use market power. We also want to shed light on government competition policy. This subject will be approached from both theoretical and applied perspectives.

Learning objectives/outcomes
At the end of the course, students should

• have a deep knowledge of the basic models of oligopoly theory,
• understand how or why oligopolistic firms manage to exert market power,
• understand how governments design and apply competition policy,
• be able to apply all these concepts to real-life situations.

Teaching methods

Due to the COVID-19 crisis, the information in this section is particularly likely to change.

Teaching is done through a ‘flipped classroom’ approach:

• First, students interact with new material online (via Moodle; see below);
• Second, in-person classes allow the instructor to go over the learning activities that students performed online and to answer their questions, so as to deepen the understanding of the main concepts and to apply them to real-life situations; classes will be organized in strict accordance with the health rules and special provisions that will be in force at the time.

Note that if the sanitary situation improves, it is possible that the course will revert to the usual format, that is, with classes (lectures) coming first and students' individual work coming second.

 

Evaluation methods

Due to the COVID-19 crisis, the information in this section is particularly likely to change.

The assessment of this course is based on weekly assignments and a final exam.

• Weekly assignments. Each week, a number of learning activities (e.g., solution of numerical problems, discussion of case-studies, quizzes, etc.) are proposed to students to help them engage with the material posted online. Students have the possibility, on a voluntary basis, to collect their answers to these activities within an assignment (‘homework’) that they can submit for assessment on Moodle.
• Final exam. The exam covers the entirety of the course. It is organized in the January and September exam sessions. It aims at testing the student’s knowledge of the main concepts and their ability to apply these concepts through (i) the solution of numerical problems and (ii) the discussion of a real-life case study. The exact format of the exam (written or oral, in-person or online) will be decided in due time, in strict accordance with the health rules and special provisions that will be in force.

Other information

It is assumed that the student has taken 'ECGE1222 - Microéconomie' (or equivalent). The student should be comfortable with applying calculus and should have a rudimentary knowledge of game theory, as is introduced in 'ECGE1222 - Microéconomie' or as is further covered in 'ECGE1333 - Théorie des jeux et économie de l'information'. For those who have not taken a course in game theory, we will have a review of important concepts as well as one class dedicated to solving game theory problems.

Online resources

A Moodle website is dedicated to the course. The slides and most of the readings are made available on the site. The site is also be used to send course related information.

Bibliography

The course will rely heavily on the required textbook by Paul Belleflamme and Martin Peitz, Industrial Organization: Markets and Strategies (Cambridge: Cambridge University Press, 2015; 1st edition, 2010).
Occasional additional readings (typically news articles) may be posted on the Moodle website.
Students are encouraged to scan the business sections of magazines and newspapers such as The Economist, Wall Street Journal, and Financial Times for articles relevant to the topics covered in the course.

Faculty or entity

ESPO