Industrial Organization

Credits: 9 International Accounting and Management  (Classes + Assignment)

Credits: 6 Economics (Classes)

Industrial Organization: Guidelines for distant learning
Main Reference:
Belleflamme-Peitz, Industrial Organization. Markets and Strategies, Cambridge University Press, 2015, 2d ed, Chapters 3, 4, 5, 6, 7, 20, 21, 22, 23 (for details see the syllabus).
The ebook is available at our online university library


Guidelines for the assignment

(2019-2020, 1st semester)

 

 Classes: Monday 10:00-12:00 am (room 6); Tuesday 10:00-12:00 am (room 6); Wednesday 2:00 -4:00 pm (room 1)

Opening class: 23 September 2019

Mid-term exam: 30 October, 2:00 pm

End-of-the-course exam:11 December, 2:00 pm

 

Lecturer: Luigi Luini

 

Objectives:

The aim of the course is to help students to be familiar with contemporary topics in advanced

industrial organization both theoretical and applied. The course is focused on special topics as

Network economics, Media industries and Advertising.

 

Recommended prerequisites:

Industrial Economics (introductory level) as in: Cabral, Introduction to IO, 2d ed, MIT Press, 2017, Ch. 4

Games and Strategies; Ch. 5 Monopoly; Ch. 6 (Almost) Perfect Competition; Ch. 7 Oligopoly:

Bertrand and Cournot; Ch. 8 Collusion; Ch 9 Market Power.

 

Assessment:

 

9 Credits:

Exam (80%): Part I, Part II, Part III + Assignment (20%).

A series of assignments and activities are designed to prepare students’ presentation on selected theoretical topics and case studies.

6 Credits:

Exam (100%) Part I, Part II, Part III

Syllabus

 

Long

Part I. Refreshing and advances on IO theoretical topics. Market power and sources of market power

1.Oligopoly models: Cournot, Bertrand, Hotelling, Stackelberg. Static and dynamic aspects of imperfect competition

1.1 Sequential choice: Stackelberg, 1.2 One leader and one follower, 1.3 One leader and an endogenous number of followers, 1.4 Commitment, 1.5 Free entry: endogenous number of firms, 1.6 Properties of free-entry equilibria, 1.7 The Cournot model with free entry, 1.8 Price competition with free entry, 1.9 Monopolistic competition, 1.10 Industry concentration and firm turnover, 1.11 Exogenous versus endogenous sunk costs, 1.12 Dynamic firm entry and exit

Reference:

Belleflamme-Peitz, Industrial Organization, CUP, 2015, Ch 3& 4

 

2 Product differentiation: Empirical analysis

2.1 Probabilistic choice and the logit model, 2.2 Empirical analysis of horizontal product differentiation, 2.3 Empirical analysis of vertical product differentiation, 2.4 Nested logit and other extensions

Reference:

Belleflamme-Peitz, Industrial Organization, CUP, 2015, Ch 5

 

3 Asymmetric information, price and advertising signals

3.1 Asymmetric information problems, 3.1.1 Hidden information problem, 3.1.2 Hidden action problem, 3.2 Advertising and price signals, 3.2.1 Advertising signals, 3.2.2 Price signals, 3.2.3 Joint price and advertising signals, .3 Price signalling under imperfect competition

Reference:

Belleflamme-Peitz, Industrial Organization, CUP, 2015, Ch 6

 

4  Consumer inertia

4.1 Uninformed consumers and search costs, 4.2 Price dispersion, 4.3 Consumer search, 4.4 Empirical investigation of price dispersion, 4.5 Switching costs, 4.6 Competitive effects of switching costs, 4.7 Coupons and endogenous switching costs, 4.8 Estimating switching costs, 4.9 Customer poaching

Reference:

Belleflamme-Peitz, Industrial Organization, CUP, 2015, Ch 7

 

Part II. Networks, Standards and Systems, Market Intermediation

 

5 Intellectual property rights

5.1 Alternative incentive mechanisms: rewards and secrecy, 5.2 Protection of IP in practice,

Protecting innovations, 5.2.1 Optimal design of IP rights, 5.2.2 Rewards vs. patents, 5.2.3 Secrecy vs. patents 5.3 Cumulative innovations, 5.3.1 Sequential innovations and holdup 5.3.2 Complementary innovations and anticommons, 5.4 Intellectual property in the digital economy, 5.4.1 End-user piracy, 5.4.2 Software protection

Reference:

Belleflamme-Peitz, Industrial Organization, CUP, 2015, Ch. 19

 

  1. Markets with network goods

6.1 Network effects, 6.2 Direct and indirect network effects, 6.3 Network effects and switching costs, 6.4 Empirical evidence on network effects,  6.5 Markets for a single network good, 6.6 Modelling the demand for a network good, 6.7 Provision of a network good, 6.8 Markets for several network goods, 6.9 Demand for incompatible network goods, 6.10 Oligopoly pricing and standardization

Reference:

Belleflamme-Peitz, Industrial Organization, CUP, 2015, Ch. 20

 

7  Strategies for network goods

7.1 Choosing how to compete, 7.2 A simple analysis of standardization, 7.3 A full analysis of standardization, 7.4 Strategies in standards wars, 7.5 Building an installed base for pre-emption, 7.6 Backward compatibility and performance, 7.7 Expectations management, 7.8 Public policy in network markets, 7.9 Ex ante interventions, 7.10 Ex post interventions

Reference:

Belleflamme-Peitz, Industrial Organization, CUP, 2015, Ch. 21

 

8  Markets with intermediated goods

8.1 Intermediaries as dealers, 8.2 Intermediated versus nonintermediated trade, 8.3 Dealer versus pure platform operator, 8.4 Intermediaries as matchmakers, 8.5 Divide-and-conquer strategies, 8.6 Sorting by an intermediary in a matching market, 8.7 Intermediaries as two-sided platforms, 8.8 The price structure for intermediation services, 8.9 Competing intermediaries, 8.10  Implications for antitrust and regulation, 8.11 Network effects in media industries

 

References:

Main:

Belleflamme-Peitz, Industrial Organization, CUP, 2015, Ch. 22

Additional:

Parker, G., M. Van Alstyne, 2005, Two-Sided Network Effects: A Theory of Information Product Design,

Management Science

 

9 Information and reputation in intermediated product markets

9.1 Intermediation and information, 9.2 Information overload, 9.3 ‘Infomediaries’ and competition in search markets, 9.4 Information and recommendation networks, 9.5 Intermediation and reputation, 9.6 Certifying intermediaries, 9.7 Reputation systems

Reference:

Belleflamme-Peitz, Industrial Organization, CUP, 2015, Ch. 23

 

Part III. Selected topics in ICT industry: Media Industries

10 The Economics of Network Neutrality

10.1 Centrality of the access question, 10.2 Private and social incentives to (not) prioritize contents

 

Reference:

Economides N., B. E. Hermalin, 2012, The Economics of Network Neutrality, RAND Journal of Economics

 

11 The media markets as two-sided markets

The role of intermediaries in: 11.1 Media, 11.2 Payment card, 11.3 Operating systems

Reference:

Rysman, M,  2009, The economics of two-sided markets, Journal of Economic Perspectives

 

12 Internet markets

12.1 Scale and customization, 12.2 Online and offline advertising: targeting, obtrusiveness

and privacy, 12.3 Online and offline commerce

 

Reference:

Levin J.D., 2011, The economics of internet markets, wp NBER

 

13 Features of the (traditional) media markets

13.1 The first side: Audience, 13.2 The second side: Advertising, 13.3 Markets for news, 13.4 TV markets,  13.5 Movie market, 13.6 Music market

 

References:

Anderson S, and J Gabszewicz, 2006, The media and advertising: a tale of two-sided markets, Handbook of the Economics of Art and Culture

Van der Wurff  R, 2005, Competition, Concentration and Diversity in European Television Markets, Journal of Cultural Economics

Eliashberg J, A Elberse, M Leenders, 2006, The motion picture industry: Critical issue in practise, current research and new research directions, Marketing Science

Schulhofer-Wohl S, M. Garrido, 2009, Do Newspapers Matter? Evidence from the Closure of The Cincinnati Post, WP

George L, J Waldfogel, 2006, The New York Times and the Market for Local Newspapers, American Economic Review

Alexander P J, 2002, Market Structure of the Domestic (US) Music Recording Industry, 1890-1988, Historical Methods

 

14 Variety in (traditional) media industry

14.1 Program diversity. 14.2 Information plurality

References:

Dimmick J and D. G. McDonald, 2001, Network Radio Oligopoly (US), 1926–1956: Rivalrous Imitation and Program Diversity, Journal of Media Economics

Suhck Bae, Hyuhn, 1999, Product Differentiation in Cable Programming: The Case in the Cable National All-News

Networks, Journal of Media Economics

 

15 Cloud computing

15.1 Platform competition, 15.2 Cloud  Security

Reference:

Fershtman, C., N. Gandal, 2012. Migration to the cloud ecosystem: Ushering in a new generation of platform competitionCEPR Discussion Papers 8907

 

 

Elective topics for assignments (9 credits only):

Spectrum Allocation: Advanced topics
Pricing in search engine advertising
Attention economy
Collaborative action models
E-commerce: online and offline competition and complementarity
Magazines
Books

Price Discrimination in the Information Age

Reputation systems’ weakness

Advertising and R&D substitutability

Concentration in online advertising markets

Superstars in Two-Sided Markets

Industrial revolution in services, retail, and wholesale

Free download and piracy: Music market, Movie market
Public service broadcasting in the digital world
Free vs. fee debate
The long tail and the distinction between amateur and professional
Digital media start-ups
Social networks

Worker-managed digital platforms
Wikipedia

Open Source
Cloud computing: Platform competition, Security

 

 

 

Selected  Bibliography for writing the Assignment:

Srnicek, Nick, (2017) Platform  capitalism; Polity P.

Ross, Alec, (2016) Industries of the future, Simon & Schuster, Ch. 5: Data: The raw material of the information age, pp 152-185

Koen, Frenken, Arnoud van Waes, Magda Smink, Rinie van Est  (2018) Safeguarding public interests in the platform economy, Vox,  3 April

Pasquale, Frank (2018) Tech Platforms and the Knowledge Problem, American Affairs, May 20

See also:

The Economist:

The techlash against Amazon, Facebook and Google—and what they can do

March 20, 2018, Available at: https://www.economist.com/briefing/2018/01/20/the-techlash-against-amazon-facebook-and-google-and-what-they-can-do

 

Aguiar, Luis, Joe  Waldfogel (2018)  Platforms, Promotion, and Product Discovery: Evidence from Spotify Playlists, NBER WP No. w24713

Anderson,  Simon P.,  Foros,  Øystein,  Kind  Hams J. (2018),  CEPR Discussion Paper No. DP13022

Caffarra, Cristina, Oliver Latham, Matthew Bennett, Federico Etro, Pierre Régibeau, Robert Stillman (2018) Google Android: European ‘techlash’ or milestone in antitrust enforcement? Vox 27 July

Carton, Benjamin, Joannes Mongardini, Yiqun Li (2018) A New Smartphone for Every Fifth Person on Earth: Quantifying the New Tech Cycle, IMF wp

de Cornière, Alexandre, Greg Taylor, (2018) On the economics of the Google Android case, Vox, 15 August

de Cornière, Alexandre, Greg Taylor, (2018),  Upstream Bundling and Leverage of Market Power,  CEPR Discussion Paper No. DP13083

Gabaix, Xavier (2018) Behavioral inattention,  NBER Working Paper No. w24096

Gentzkow Matthew, Jesse M. Shapiro (2008) Competition and Truth in the Market for News, J Econ Perspectives, 22, 133-154.

Peukert, Christian, Imke Reimers, (2018) “Digital Disintermediation and Efficiency in the Market for Ideas,” CESifo Working Paper Series No. 6880

 

Prat, Andrea, Tommaso Valletti (2018) Attention Oligopoly, WP

Cavenaile, L,, R. Pau (2019) “Advertising, Innovation and Economic Growth”   Banco de Espana Working Paper No. 1902

DeCarolis F, G. Rovigatti  (2019) “From Mad Men to Maths Men: Concentration and Buyer Power in Online Advertising”CEPR Discussion Paper No. DP13897

Anderson,SP, A Baik , N. Larson (2019) “Price Discrimination in the Information Age: Prices, Poaching, and Privacy with Personalized Targeted Discounts”  CEPR Discussion Paper No. DP13793

Filippas,A.,  JJ Horton,J, Golden  (2019) “Reputation Inflation”  NBER Working Paper No. w25857

Carroni ,E,. L. Madio, , S. Sheckar (2019) “Superstars in Two-Sided Markets: Exclusives or Not?”  CESifo Working Paper No. 7535

Hsieh, Chang-Tai, E. Rossi Hansberg (2019) “The Industrial Revolution in Services”  CEPR Discussion Paper No. DP13797