Credits: 9 Management and Governance (Classes + Assignment)
Credits 6 Economics (Classes)
ETCS: 9
(2017-2018, 1st semester)
Classes: Monday 10:00-12:00 am (Room 6); Tuesday 4:00-6:00 pm (Room 6); Wednesday 2:00 – 4:00 pm (Room 10)
Opening class: 25 September 2017
Mid-term exam: 8 November, 2:00 pm
End-of-the-course exam: 20 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, MIT Press, 2001, 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
Short
Part I. Refreshing and advances on IO theoretical topics. Market power and sources of market power
1 Oligopoly models: Cournot, Bertrand, Hotelling, Stackelberg
2 Product differentiation: Empirical analysis
3 Asymmetric information, price and advertising signals
4 Consumer inertia
Part II. Networks, Standards and Systems, Market Intermediation
5 Intellectual property in the digital economy
6 Markets with network goods
7 Strategies for network goods
8 Markets with intermediated goods
9 Information and reputation in intermediated product markets
Part III. Selected topics in ICT industry. Media Industries
10 The Economics of Network Neutrality and the access question
11 Two-sided markets: Media, payment card, operating systems
12 Internet markets: Scale and customization, online and offline advertising and commerce, cloud computing
13 Features of the (traditional) media markets: Audience and advertising
14 Variety in media industry: Program diversity and information plurality
15 Cloud computing
Main Reference:
Belleflamme-Peitz, Industrial Organization. Markets and Strategies, 2d ed, CUP, 2015, Ch. 3, 4, 5, 6, 7, 19, 20, 21, 22, 23.
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
- 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, 25 (6), 638-61.
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 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 , 12, 4, 265-277
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 competition, CEPR Discussion Papers 8907
Elective topics for assignments (9 credits only):
(additional bibliography available at the lecturer’s web page)
Spectrum Allocation: Advanced topics; Pricing in search engine advertising; Attention economy;
Collaborative action models; E-commerce: online and offline competition and complementarity;
Magazines; Books; 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; Wikipedia; Open Source; Cloud computing: Platform competition, Security.