Industrial Organization I (ECON-GA.1801.1.001.FA25) Fall 2025
Boyan Jovanovic Revised 9/1/25
Tue 10-12AM in room 736
Office: 19 W. 4th St. room 729. Office hrs: by appointment
Assistant: Mary Zhang lz1634@nyu.edu
First class Tuesday Sept. 2, last class Tuesday Dec. 2. Our last class officially is Dec. 9 but instead of meeting then, we will meet on Tuesday Oct 14 which the academic calendar designates as “legislative Monday.”
Notes and other material will be on NYU Brightspace. The homework is always based on the class notes. The papers are just for background.
REQUIREMENTS: A Problem set is due each Tuesday by 10AM by email, at which time I will present my answer in class. The homework will not require programming or handling data. I.e., it will involve mainly algebra. Your answer should be typed or written very clearly and photographed or scanned. Class notes will be posted a day or two before each class.
Protocol: Regular attendance of those who are registered. Discuss the homework with others but do not share electronic files. Auditors are welcome
IO Field requirements:
P = Grade of B+ or better in “Industrial Organization I,” Jovanovic, Fall 2025, Chris Conlon “Industrial Organization ” (Fall 2025. Thursdays 10 AM - 1 PM), plus one of Audrey Tiew's or Anh Nguyen's (we encourage students to take both). For a secondary field any two courses count. Dan Waldinger (on leave AY 2025/6) will not teach IO 2 until the Spring of 2027, but he is around and will teach an undergrad course this year.
And S = Grade of B or better in two courses: Any two of the following:
IO 2 (Audrey Tiew or Anh Nguyen),
IO (Conlon)
IO 1 (Jovanovic),
Contact: Jovanovic, Waldinger.
This course also counts towards the Macroeconomics field. Requirements
P = Three courses plus attendance in the Macroeconomics Workshop (please note that students should NOT officially enroll in this workshop but must attend both semesters).
S = Two courses and no Macroeconomics Workshop requirement.
Courses include: .....
Contact: Borovicka, Fernandez, Jovanovic, Lagos, Menzio, Sargent
2025 IO day: The Twenty Third Annual IO Day workshop will be held (in person) at NYU Stern on Friday, September 12th, 2025.
IO day will give you a good idea of current research in IO. I generally try to relate the class material to IO day talks and to upcoming IO talks.
Check the IO seminar website for the upcoming talks for the Fall.
Course outline PRELIMINARY
The following topics will be covered, but the order and emphasis will depend on what happens in class and on students’ interests. Our first 2 classes Sept 2 and Sept 9 we may do some prep for IO day. (you are not required to attend IO day but you may want to)
Starred * items will be covered in detail – that is the plan.
IO Day 2025
….. Remarks on non IO topics
Macro: Bank runs, Grossman-Stiglitz, (mention only: Albagli-Hellwig-Tsyvinski), Asset pricing
……Real estate Landvoight + Finance,
Mention only : Herkenhoff "The Impact of Commercial Real Estate Regulations on U.S. Output" written with Fil Babalievsky, Lee E. Ohanian, and Edward C. Prescott
…. Rent-grabbing and free riding toy model
Customer capital & Switching Costs
* Cabral “Switching Costs & Equibrium Prices.” RED 16
Gourio & Rudanko Customer capital. RES 14
Ursu “The Power of Rankings,” 2017
Weitzman “Optimal Search for best alternative” Econometrica 79
Galperti-Liu-Perego "Competitive Markets for Personal Data" 24
Bergemann & Ozmen “…Recommender Systems.”
Grossman, S. “Warranties…” J. Law & Econ. 81
Fishman & Rob. “The Durability of Information,& the Size of Firms.” IER 95
Dixit & Rob “Switching Costs & Sectoral Adjustments”…JET 1994
Task-based production functions and AI
Acemoglu and Restrepo and…
Bertrand and Cournot equilibria, Commitment, etc.
* Kreps & Scheinkman. “Quantity precommitment..”…Bell J. Econ. 83
Davidson & Deneckere “…competition in capacity…and in price” RAND J. 86
Spence "Monopoly, quality, and regulation." Bell Journal of Econ. 75.
*Coase “Durability and monopoly.” J. Law and Econ.72
*Prescott and Visscher "Sequential Location of Firms with Foresight" BJE 77
Jovanovic & Ueda "Contracts and Money" JPE 97
Collusion, Prisoner's Dilemma
*Green & Porter “Noncooperative Collusion…” Econometrica 84
Benoit & Krishna "Finitely Repeated Games" Econometrica 85
Blair 2023 Observations on the Merger guidelines Rev. Ind. Org. 24
Concession games
*Hendricks Weiss & Wilson. "The war of attrition in continuous time..." IER 88
Cetemen & Margaria. "Exit dilemma: the role of private learning on firm survival." AEJ Micro 24
Beraja & Buera "The Life-Cycle of Concentrated Industries" wp March 24
Signaling, adverse selection
* Mailath “…Signaling…Continuum of Types.” Econometrica 88
*Spence “..Responses to Signals….” JET 74
Fuchs, Green & Papanikolaou. "… Slow Moving Capital…." JFE 16
Milgrom & Roberts “Limit Pricing and Entry…” Econometrica 1982
Milgrom & Roberts “Pricing and Advertising Signals,” JPE 86
Glosten & Milgrom “….heterogeneously informed traders” JFE 85
Stiglitz and Weiss “Credit Rationing …. Imperfect Information” AER 81
Lending, default, audits & Information design
Townsend “Costly State Verification” JET 79
Holmstrom & Tirole "Financial intermediation, loanable funds, and the real sector." QJE 97
Bernanke & Gertler “Agency Costs, Net Worth, …” AER 89
Crawford & Sobel “Strategic Information Transmission” Econometrica 82
Kamenica & Gentzkow “Bayesian Persuasion” AER 11
Bank Runs, Multiple equilibria
*Diamond & Dybvig “Bank Runs,…Liquidity.” JPE 83
Green & Lin "Implementing efficient allocations in a model of financial intermediation" JET 03
Allen & Gale. “ Financial Contagion,” JPE 00
Davila & Goldstein "Optimal Deposit Insurance" JPE 23
Assignment models
*Landvoight, Piazzesi & Schneider "Housing markets in San Diego" AER 15
*Gabaix & Landier. “Why Has CEO Pay Increased So Much?" QJE 08
Fernandez & Gali "..The Matching Problem with Borrowing Constraints" RES 99
Waiting time and sampling problems
Dixit & Pindyck Investment under Uncertainty. Princeton U.P. 94
*Easley & Kiefer"Controlling a process with unknown parameters." Econometrica 88
Cuneo “…”
Adaptive control with beliefs as a state
*Easley & Kiefer “Controlling a process with Unknown Parameters.” Ecma ‘88
Kiefer & Nyarko “…Control of an Unknown Process with Learning.” IER 89
Li & Weinberg “Firm-Specific Learning…” IER 03
Rent-grabbing, patents
Hegde, Herkenhoff & Zhu “Patent Publicaion & Innovation” nber wp 22
*Loury “Market Structure & Innovation.” QJE 79
Lee & Wilde. “Market Structure & Innovation.” QJE 80
Reinganum “Uncertain Innovation & Persistence of Monopoly.” AER 83
Firm dynamics, Tobin’s Q-investment relations
*Lucas & Prescott. “Investment under Uncertainty.” Econometrica 71
Ye, Zheng & Zhu “Tick size & manager learning from stock prices. J. Accounting and Econ. 23.
Hopenhayn, “Entry, Exit, and firm Dynamics…” Econometrica 92
*Hopenhayn “.Exit, selection, and the value of firms.” JEDC (1992)
Kesten “Random Difference Equations,” Acta Mathematica 73
Whited “.Diversification discount?” 01 JF
Entrepreneurship, Firms’ Internal Organization
Garicano “Hierarchies…” JPE 00
Prescott & Visscher “Organization Capital.’’ JPE 80.
*Kremer “O-ring Production Function” QJE 93
*Lucas. "On the Size Distribution of Business Firms." Bell J 78
Gabaix & Landier Why has CEO pay increased so much? QJE 08 Slides
Eeckhout & Kircher “Assortative Matching with Large Firms.” Ecma 17
Common priors vs. Agreeing to disagree
*Grossman &. Stiglitz “…Informationally Efficient Markets.” AER 80
Albagli, Hellwig, & Tsyvinski, “Information aggregation with asymmetric asset payoffs. The Journal of Finance, 2024
Milgrom “Rational Expectations…Bidding.” Econometrica 1981
*Harrison & Kreps “Speculative Investor Behavior ” QJE 78
Guzman & Stiglitz “…Pseudowealth…” 17
Morris “Speculative Investor Behavior and Learning.” QJE 96
[[Macro/GE extensions by Blume & Easley 06 and Borovicka ]]
Scheinkman & Weiss “Borrowing Constraints…” Econometrica 86
Other topics from past years– a few may be covered.
Agency problems, Internal organization of the firm, persuasion
Basics …
Bayes rule, waiting-time distributions,
the Bernoulli, Pareto, , Poisson distribution, Hazard rates
The renewal equation, Gumbel, Logistic distributions
Continuous-time and discrete-time Bellman equations
Price distributions
Prescott “Efficiency of the Natural Rate” JPE 75 (preceded by short tour of search theory,
with Stigler JPE 61 McCall JBus 65, Diamond JET 71 , Burdett AER 78 Burdett-Judd 83, Varian 80
Directed search Guerrieri & Shimer. “Dynamic Adverse Selection.’’ 12
Technology diffusion
Manea. “Intermediation & Resale in Networks.” JPE 18
Bass. “Model for Product Growth…” Mngmt Sc. 69
Lucas & Moll: “Knowledge growth…” JPE 14
Perla & Tonetti: “ Imitation & Growth.” JPE 14
Inequality and polarization of jobs & earnings
Piketty Capital in the 21st Century Figures only
Doppelt “The Hazards of Unemployment,” 2016 Slides
Ljungqvist & Sargent. "European unemployment dilemma." JPE 98
Landier “Entrepreneurship and the Stigma of Failure” 04
Autor & Dorn “… Polarization of the US Labor Market’’ AER 13
Anderson & Smith “Dynamic Matching…” RES 10
Pries & Rogerson “Declining Worker Turnover.” AEJ Macro 2021
Learning curves
Thompson “Learning by Doing.” Handbook… 10
Venezia “"On the statistical origins of the learning curve” EJOR
Inventories, speculation
Hotelling, Harold. “The Economics of Exhaustible Resources.” JPE 31
Deaton & Laroque “On the Behaviour of Commodity Prices.” RES 92
Deaton & Laroque. “Competitive Storage and Commodity Price Dynamics.” JPE 96
Contracting
Shapiro & Stiglitz “Unemployment as a discipline device.” AER 84 (limit pricing)
Golosov & Menzio "Agency Business Cycles" TE 20
Albuquerque & Hopenhayn “Optimal Lending Contracts and Firm Dynamics” RES 04
Clementi & Hopenhayn “A Theory of Financing Constraints & Firm Dynamics.” QJE 06
Industry life cycle, demand shocks
Gort & Klepper “Time Paths in the Diffusion of Product Innovations.” EJ 92,
Rob, “Learning and Capacity Expansion under Demand Uncertainty.” RES 91
Stigler vs. Shannon
Stigler JPE 61 The Theory of Search
Sims “Rational Inattention....” JME 03 and Handbook 10
Related to IO day 2019
Grossman & Hart “Costs & Benefits of Ownership.’’JPE 86
Azevedo, et al. “The A/B Testing Problem.” At 10AM and
Liang, Mu, & Syrgkanis. “Dynamically Aggregating Diverse Information.” At 2:15PM
Zhong, W. “Optimal Dynamic Info. Acquisition.” 19
IO Day 2024
Galperti-Liu-Perego "Competitive Markets for Personal Data" 24
Castillo "Sources of Market Power in Web Search: Evidence from a Field Experiment,” 24
Muir "Optimal Opaqueness: Multi-product Monopoly Pricing..." see also "Optimal Hoteling Auctions."
Williams "Distributional Impacts of the Changing Retail Landscape" 24