Osaka 2018/1st - Foundation of Industrial Organization

Foundation of Industrial Organization | 産業組織論基礎

Microeconomic Analysis I | ミクロ経済分析1

• Syllabus in English | 講義シラバス（日本語）

• 1st semester / Wednesday 1st slot / Seminar Room 1 （演1）

• Office Hours: Wednesdays 11:30 - 12:30

Last update | 最終更新日: July 25, 2018

Announcement | お知らせ

• There is NO class on June 13. 2018/6/12

• If you plan to attend this course (even if you are just sitting), please fill THIS FORM on-line! <= Important!

• The first lecture will be on April 11 (Wed). 2018/1/16

Course Objective and Content | 講義概要・目的

• The course provides a graduate level introduction to Industrial Organization (IO).

• We cover 7-8 central and fundamental topics in IO:

  • each topic consists of two classes; one focuses on theoretical papers and the other on empirical papers.

  • all classes except for the first one are based on students' presentations.

Learning Goals | 学習目標

• To understand fundamental literature on both theoretical and applied/empirical IO.

• To acquire basic analytical skills for writing a research paper on IO.

Prerequisite | 受講条件

• Basic understandings of microeconomics, game theory, and econometrics (at intermediate undergraduate level).

Grading Policy | 成績評価

• Based on the presentation and final report.

• Auditing students MUST make at least one presentation but need NOT submit the final report.

  • Presentation can be given in English or Japanese, but SLIDES must be typed in ENGLISH. Students are encouraged to speak in English. All lectures except for the first one consist of students' presentations.

  • Final report can be written in English or Japanese. Suggested length is 2-5 pages. Your report should be either

    • 1. 1) an original paper/idea on industrial organization,

      2. 2) a referee report on a related paper which is not directly covered in class, or

      3. 3) a survey on a specific issue of auction market design.

  • The submission deadline is July 31. You can send your report via e-mail to me <yosuke.yasuda(at)gmail.com>.

Textbooks | 講義テキスト

• Textbook 1 [Tirole]: Tirole, The Theory of Industrial Organization, 1988. Amazon

  • The "bible" of industrial organization, which contains essential insights in the theoretical IO literature up to 80s.

• Textbook 2 [B&P]: Belleflamme and Peitz, Industrial Organization: Markets and Strategies (2nd), 2015. Amazon

  • An up-to-date graduate level textbook, which covers both theories and applications.

• Reference 1: Cabral, Introduction to Industrial Organization (2nd), 2017. Amazon

  • An insightful undergraduate textbook, which mainly focuses on theoretical models.

• Reference 2: Schmalensee and Willig ed., Handbook of Industrial Organization, vol. 1, 1989. Amazon

  • A collection of seminal survey articles on the early literature on IO.

• Reference 3: Corchón and Marini ed., Handbook of Game Theory and Industrial Organization, vol. 1 & 2, 2018. Amazon

  • A collection of latest survey articles on game theory and IO.

You are expected to read all double-starred (**) articles and encouraged to read starred(*) articles below.

Lectures on Industrial Organization | 産業組織論講義

• [Graduate Course]

• Glenn Ellison | MIT (2005; 2013)

• [Undergraduate]

• To be written...

Lecture 1 Foundations of Cournot Model 4/11

• Kreps, D. M., & Scheinkman, J. A. (1983). Quantity precommitment and Bertrand competition yield Cournot outcomes. The Bell Journal of Economics, 326-337.

• Herk, L. F. (1993). Consumer choice and Cournot behavior in capacity-constrained duopoly competition. The RAND Journal of Economics, 399-417.

References

• [Tirole] Chapter 5.

• [B&P] Chapter 3.

• Davidson, C., & Deneckere, R. (1986). Long-run competition in capacity, short-run competition in price, and the Cournot model. The Rand Journal of Economics, 404-415.

• Allen, B., & Hellwig, M. (1993). Bertrand-Edgeworth duopoly with proportional residual demand. International Economic Review, 39-60.

• Moreno, D., & Ubeda, L. (2006). Capacity precommitment and price competition yield the Cournot outcome. Games and Economic Behavior, 56(2), 323-332.

• Acemoglu, D., Bimpikis, K., & Ozdaglar, A. (2009). Price and capacity competition. Games and Economic Behavior, 66(1), 1-26.

• Deneckere, R., & Peck, J. (2012). Dynamic competition with random demand and costless search: A theory of price posting. Econometrica, 80(3), 1185-1247.

Lecture 2 Monopoly Pricing [Theory] 4/18

• Shapiro, C. (1983). Optimal pricing of experience goods. The Bell Journal of Economics, 497-507.

  • Saruta: slide

• Gul, F., Sonnenschein, H., & Wilson, R. (1986). Foundations of dynamic monopoly and the Coase conjecture. Journal of Economic Theory, 39(1), 155-190.

  • Kawanaka: slide

References

• [Tirole] Chapter 1

• Spence, A. M. (1975). Monopoly, quality, and regulation. The Bell Journal of Economics, 417-429.

• Bergemann, D., & Välimäki, J. (2006). Dynamic pricing of new experience goods. Journal of Political Economy, 114(4), 713-743.

• Calzolari, G., & Pavan, A. (2006). Monopoly with resale. The RAND Journal of Economics, 37(2), 362-375.

• Segal, I. (2003). Optimal Pricing Mechanisms with Unknown Demand. American Economic Review, 509-529.

Lecture 3 Monopoly Pricing [Evidence] 4/25

• Chevalier, J. A., Kashyap, A. K., & Rossi, P. E. (2003). Why don't prices rise during periods of peak demand? Evidence from scanner data. The American Economic Review, 93(1), 15-37.

  • Tanaka: slide

• Chevalier, J., & Goolsbee, A. (2009). Are durable goods consumers forward-looking? Evidence from college textbooks. The Quarterly Journal of Economics, 124(4), 1853-1884.

  • Tanji: slide

References

• [Tirole] Chapter 1

• Hendel, I., & Nevo, A. (2006). Measuring the implications of sales and consumer stockpiling behavior. Econometrica, 74(6), 1637-1673.

Lecture 4 Price Discrimination [Theory] 5/9

• Maskin, E., & Riley, J. (1984). Monopoly with incomplete information. The RAND Journal of Economics, 15(2), 171-196.

• McAfee, R. P., McMillan, J., & Whinston, M. D. (1989). Multiproduct monopoly, commodity bundling, and correlation of values. The Quarterly Journal of Economics, 104(2), 371-383.

  • Nunogami: slide

References

• [Tirole] Sections 3.0–3.5.

• Deneckere, R. J., & Preston McAfee, R. (1996). Damaged goods. Journal of Economics & Management Strategy, 5(2), 149-174.

Lecture 5 Price Discrimination [Evidence] 5/16

• Shepard, A. (1991). Price discrimination and retail configuration. Journal of Political Economy, 99(1), 30-53.

  • Fang: slide

• Leslie, P. (2004). Price discrimination in Broadway theater. RAND Journal of Economics, 520-541.

  • Mizuta: slide

References

• [Tirole] Sections 3.0–3.5.

• Graddy, K. (1995). Testing for imperfect competition at the Fulton fish market. The RAND Journal of Economics, 75-92.

• Borenstein, S., & Rose, N. L. (1994). Competition and price dispersion in the US airline industry. Journal of Political Economy, 102(4), 653-683.

Lecture 6 Static Competition [Theory] 5/23

• Shaked, A., & Sutton, J. (1982). Relaxing price competition through product differentiation. The review of economic studies, 3-13.

  • Tanaka => postponed

• Klemperer, P. (1987). The competitiveness of markets with switching costs. The RAND Journal of Economics, 138-150.

  • Kawanaka: slide

References

• [Tirole] Section 2.1, and Chapter 5.

• Perloff, J. M., & Salop, S. C. (1985). Equilibrium with product differentiation. The Review of Economic Studies, 52(1), 107-120.

• Brander, J. A., & Lewis, T. R. (1986). Oligopoly and financial structure: The limited liability effect. The American Economic Review, 956-970.

• Klemperer, P. D., & Meyer, M. A. (1989). Supply function equilibria in oligopoly under uncertainty. Econometrica: Journal of the Econometric Society, 1243-1277.

• Holmes, T. J. (1989). The effects of third-degree price discrimination in oligopoly. The American Economic Review, 79(1), 244-250.

• Ellison, G. (2005). A model of add-on pricing. The Quarterly Journal of Economics, 120(2), 585-637.

Lecture 7 Static Competition [Evidence] 5/30

• Bresnahan, T. F. (1987). Competition and collusion in the American automobile industry: The 1955 price war. The Journal of Industrial Economics, 457-482.

  • Tanji: slide

• Berry, S. T. (1994). Estimating discrete-choice models of product differentiation. The RAND Journal of Economics, 242-262.

  • Mizuta: slide

References

• [Tirole] Section 2.1, and Chapter 5.

• Goldberg, P. K. (1995). Product differentiation and oligopoly in international markets: The case of the US automobile industry. Econometrica: Journal of the Econometric Society, 891-951.

• Corts, K. S. (1998). Third-degree price discrimination in oligopoly: all-out competition and strategic commitment. The RAND Journal of Economics, 306-323.

• Dubé, J. P., Hitsch, G. J., & Rossi, P. E. (2009). Do switching costs make markets less competitive?. Journal of Marketing research, 46(4), 435-445.

Lecture 8 Search [Theory] 6/6

• Wolinsky, A. (1983). Retail trade concentration due to consumers' imperfect information. The Bell Journal of Economics, 275-282.

  • Fang: slide

• Stahl, D. O. (1996). Oligopolistic pricing with heterogeneous consumer search. International Journal of Industrial Organization, 14(2), 243-268.

  • Saruta: slide

References

• Diamond, P. A. (1971). A model of price adjustment. Journal of economic theory, 3(2), 156-168.

• Varian, H. R. (1980). A model of sales. The American Economic Review, 70(4), 651-659.

• Wolinsky, A. (1984). Product differentiation with imperfect information. The Review of Economic Studies, 51(1), 53-61.

• Anderson, S. P., & Renault, R. (1999). Pricing, product diversity, and search costs: A Bertrand-Chamberlin-Diamond model. The RAND Journal of Economics, 719-735.

• Baye, M. R., & Morgan, J. (2001). Information gatekeepers on the internet and the competitiveness of homogeneous product markets. American Economic Review, 454-474.

Lecture 9 Search [Evidence] 6/20

• Sorensen, A. T. (2000). Equilibrium price dispersion in retail markets for prescription drugs. Journal of Political Economy, 108(4), 833-850.

  • Nunogami: slide

• Hortaçsu, A., & Syverson, C. (2004). Product differentiation, search costs, and competition in the mutual fund industry: A case study of S&P 500 index funds. The Quarterly Journal of Economics, 119(2), 403-456.

References

• Hong, H., & Shum, M. (2006). Using price distributions to estimate search costs. The RAND Journal of Economics, 37(2), 257-275.

• Ellison, G., & Ellison, S. F. (2009). Search, obfuscation, and price elasticities on the internet. Econometrica, 77(2), 427-452.

• De los Santos, B., Hortaçsu, A., & Wildenbeest, M. R. (2012). Testing models of consumer search using data on web browsing and purchasing behavior. The American Economic Review, 102(6), 2955-2980.

Lecture 10 Entry [Theory] 6/27

• Dixit, A. (1980). The role of investment in entry-deterrence. The economic journal, 90(357), 95-106.

  • Saruta: slide

• Aghion, P., & Bolton, P. (1987). Contracts as a Barrier to Entry. The American economic review, 388-401.

  • Kawanaka: slide

References

• [Tirole] Sections 7.1–7.2.

• Spence, A. M. (1977). Entry, capacity, investment and oligopolistic pricing. The Bell Journal of Economics, 534-544.

• Jovanovic, B. (1982). Selection and the Evolution of Industry. Econometrica: Journal of the Econometric Society, 649-670.

• Mankiw, N. G., & Whinston, M. D. (1986). Free entry and social inefficiency. The RAND Journal of Economics, 48-58.

• Suzumura, K., & Kiyono, K. (1987). Entry barriers and economic welfare. The Review of Economic Studies, 54(1), 157-167.

• Matsumura, T., & Kanda, O. (2005). Mixed oligopoly at free entry markets. Journal of Economics, 84(1), 27-48.

Lecture 11 Entry [Evidence] 7/4

• Dunne, T., Roberts, M. J., & Samuelson, L. (1988). Patterns of firm entry and exit in US manufacturing industries. The RAND journal of Economics, 495-515.

  • Tanji: slide

• Bresnahan, T. F., & Reiss, P. C. (1991). Entry and competition in concentrated markets. Journal of Political Economy, 99(5), 977-1009.

  • Fang:

References

• [Tirole] Sections 7.1–7.2.

• Schmalensee, R. (1978). Entry deterrence in the ready-to-eat breakfast cereal industry. The Bell Journal of Economics, 305-327.

• Golder, P. N., & Tellis, G. J. (1993). Pioneer advantage: Marketing logic or marketing legend?. Journal of marketing Research, 158-170.

• Berry, S. T., & Waldfogel, J. (1999). Free Entry and Social Inefficiency in Radio Broadcasting. The Rand Journal of Economics, 397-420.

• Bronnenberg, B. J., Dhar, S. K., & Dubé, J. P. H. (2009). Brand history, geography, and the persistence of brand shares. Journal of political Economy, 117(1), 87-115.

• Bronnenberg, B. J., Dubé, J. P. H., & Gentzkow, M. (2012). The evolution of brand preferences: Evidence from consumer migration. The American Economic Review, 102(6), 2472-2508.

Lecture 12 Patent [Theory] 7/11

• Gilbert, R. J., & Newbery, D. M. (1982). Preemptive patenting and the persistence of monopoly. The American Economic Review, 514-526.

  • Mizuta: slide

• Kremer, M. (1998). Patent buyouts: A mechanism for encouraging innovation. The Quarterly Journal of Economics, 113(4), 1137-1167.

References

• [Tirole] Sections 8.1–8.3. and 10.1–10.5.

• Ellison, G., & Fudenberg, D. (1993). Rules of thumb for social learning. Journal of political Economy, 101(4), 612-643.

• Green, J. R., & Scotchmer, S. (1995). On the division of profit in sequential innovation. The RAND Journal of Economics, 20-33.

• Lerner, J., & Tirole, J. (2004). Efficient patent pools. The American Economic Review, 94(3), 691-711.

• Bessen, J., & Maskin, E. (2009). Sequential innovation, patents, and imitation. The RAND Journal of Economics, 40(4), 611-635.

Lecture 13 Patent [Evidence] 7/18

• Pakes, A. (1986). Patents as Options: Some Estimates of the Value of Holding European Patent Stocks. Econometrica, 54(4), 755-784.

• Jaffe, A. B., Trajtenberg, M., & Henderson, R. (1993). Geographic localization of knowledge spillovers as evidenced by patent citations. the Quarterly journal of Economics, 108(3), 577-598.

  • Nunogami: slide

References

• [Tirole] Sections 8.1–8.3. and 10.1–10.5.

• Griliches, Z. (1957). Hybrid corn: An exploration in the economics of technological change. Econometrica, Journal of the Econometric Society, 501-522.

• Lerner, J. (2002). Where does State Street lead? A first look at finance patents, 1971 to 2000. The Journal of Finance, 57(2), 901-930.

• Saloner, G., & Shepard, A. (1995). Adoption of Technologies with Network Effects: An Empirical Examination of the Adoption of Automated Teller Machines. The Rand Journal of Economics, 479-501.

Lecture 14 Predation [Theory] 7/25

• Milgrom, P., & Roberts, J. (1982). Predation, reputation, and entry deterrence. Journal of economic theory, 27(2), 280-312.

• Bolton, P., & Scharfstein, D. S. (1990). A theory of predation based on agency problems in financial contracting. The American economic review, 93-106.

  • Saruta:

References

• [Tirole] Sections 9.0–9.7.

• Milgrom, P., & Roberts, J. (1982). Limit pricing and entry under incomplete information: An equilibrium analysis. Econometrica: Journal of the Econometric Society, 443-459.

• Farrell, J., & Saloner, G. (1986). Installed base and compatibility: Innovation, product preannouncements, and predation. The American economic review, 940-955.

• Fudenberg, D., & Tirole, J. (1986). A" signal-jamming" theory of predation. The RAND Journal of Economics, 366-376.

Lecture 15 Advertising [Theory]

• Butters, G. R. (1977). Equilibrium distributions of sales and advertising prices. The Review of Economic Studies, 465-491.

• Becker, G. S., & Murphy, K. M. (1993). A simple theory of advertising as a good or bad. The Quarterly Journal of Economics, 108(4), 941-964.

References

• [Tirole] Sections 2.2–2.4, and 7.3.

• Milgrom, P., & Roberts, J. (1986). Price and advertising signals of product quality. Journal of political economy, 94(4), 796-821.

• Rayo, L., & Segal, I. (2010). Optimal information disclosure. Journal of political Economy, 118(5), 949-987.

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