Industrial Organization I (ECON-GA.1801.1.001.FA24) Fall 2024
Boyan Jovanovic Revised 5/30/24
Tue 10-12AM in room 736
Office: 19 W. 4th St. room 729. Office hrs: by appointment
Assistant: Jinglin Wang jw5469@nyu.edu
First class Tuesday Sept. 3, last class Tuesday Dec. 3. Our last class officially is Dec. 10 but instead of meeting then, we will meet on Tuesday Oct 15 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 from 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 2024, Daniel Waldinger “Industrial Organization II’” (Spring 2025 ) and Chris Conlon “Industrial Organization ” (Fall 2024. Thursdays 1:30-4:30 PM TBC),
And S = Grade of B or better in two courses: Any two of the following three
IO 2 (Waldinger),
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 = Same as P but no Macroeconomics Workshop requirement.
Courses include: .....
Contact: Borovicka, Fernandez, Jovanovic, Lagos, Menzio, Sargent
2024 IO day: The Twenty Second Annual IO Day workshop will be held (in person) at NYU Stern on Friday, September 6th, 2024. This year's program will soon be here: http://bit.ly/NYUSternIODay 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
The following topics will be covered, but the order and emphasis will depend on what happens in class and on students’ interests. Our first class Sept 3 and we may do some prep for IO day. The IO day schedule should be available by mid-August and I will update these notes then
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
Collusion, Prisoner's Dilemma
Green & Porter “Noncooperative Collusion…” Econometrica 84
Benoit & Krishna "Finitely Repeated Games" Econometrica 85
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
Customer capital & Switching Costs
Cabral “Switching Costs & Equibrium Prices.” RED 16
Fishman & Rob. “The Durability of Information,& the Size of Firms.” IER 95
Dixit & Rob “Switching Costs & Sectoral Adjustments”…JET 1994
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
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
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
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
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
Scheinkman & Weiss “Borrowing Constraints…” Econometrica 86
Other topics from past years– a few may be covered.
Agency problems, Internal organization of the firm, persuasion
Ursu “The Power of Rankings,” 2017
Bergemann & Ozmen “…Recommender Systems.”
Crawford & Sobel “Strategic Information Transmission” Econometrica 82
Grossman, S. “Warranties…” J. Law & Econ. 81
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
Firm dynamics
Lucas & Prescott. “Investment under Uncertainty.” Econometrica 71
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
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