Credits: 9 International Accounting and Management (Classes + Assignment)
Credits: 6 Economics (Classes)
ETCS: 9
(2020-2021, 1st semester)
Classes: Wednesday 11:00am -1:00 pm; Thursday 11:00am-1:00 pm; Friday 11:00am-1:00 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 (Main Reference: Belleflamme-Peitz, Industrial Organization, CUP, 2015.
Chs; 3, 4, 5, 6, 7, 19, 20, 21, 22, 23) + Assignment
(20%): -> See the Guidelines available at the webpage of the lecturer.
6 Credits:
Exam (100%): Part I, Part II (Main Reference: Belleflamme-Peitz, Industrial Organization, CUP,
2015. Chs; 3, 4, 5, 6, 7, 19, 20, 21, 22, 23)
Syllabus
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 and 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
6. 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
Reference: Belleflamme-Peitz, Industrial Organization, CUP, 2015, Ch. 22
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
Elective topics for assignments (9 credits only):
– Pricing in search engine advertising;
– Attention economy;
-Spectrum Allocation: Advanced topics;
– Collaborative action models;
– E-commerce: online and offline competition and complementarity in a specific market;
– News(papers), Magazines, Books;
– Music market, Movie market: Free download, piracy, streaming;
– Public service broadcasting in the digital world;
– Public-Private interest in the platform economy;
– (Ab)use of market power in the internet market;
– Consumer single/multi-homing;
– Social networks;
– Wikipedia;
– Open Source;
– Cloud computing: Platform competition, Security.
See the bibliography for writing the Assignment at the webpage of the lecturer