Economics 267

The Organization of Industry

 

Spring 2006

Wednesday 6:00 pm-8:45 pm

Koons Hall 202

Xia Wang

 

Room 445-8, Monteith

 (860) 486-9312

Office Hours TuTh 2:00-3:00 or by appointment

 

Course Description

 

Industrial organization is the study of imperfect competition.  We begin our journey by first reviewing two benchmark market structures: perfectly competition and pure monopoly.  Next, we introduce game theory and use it to explain and analyze the structure, behavior, and performance of firms in imperfectly competitive markets.  We further employ game theory to study a variety of strategic behaviors that firms use to increase profits.  Finally we address the most fundamental question in the study of industrial organization: “why do firms exist?” and learn about different approaches to the nature of the firm.

 

Course Website

 

Visit the course website

http://sp.uconn.edu/~XIW01003/ECON267.htm

for course information including the course syllabus, announcements and homework assignments.

 

 

You are expected to read the assigned material ahead of time and be ready for participating in class discussion, presenting problems in class and taking practice quizzes (you don’t have to do really well each time, but you do need to show reasonable effort).

 

There will be homework nearly every week.  Homework will be posted on the course website.  It will be due at the beginning of lecture.   Please, submit hard copies.  I do not accept electronically handed-in homework.

 

I will not penalize students who submit homework that are only one day late.  Non-penalized late homework must be placed in my department mailbox by noon on the day immediately following the official deadline.  Thereafter, homework grades will be reduced at a rate of 30% per 24 hours late (I count weekends as a single 24-hour period).

 

The 30-minute in-class quizzes will take place at the beginning of each class meeting and will be on materials covered the week before.   Please check below for the scheduled time.  I will use the best 6 quizzes of those students who take more than 6 in-class quizzes during the term.   The in-class quizzes will be marked with “+,” “v”, and “__.”  These correspond roughly to “A,” “C,” and “F.”  Students who complete less than 6 of the in-class quizzes will receive a grade of “double F” for every quiz they are missing.  There will be no makeup for the in-class quizzes.

 

There are two midterm exams.  The first will take place on February 15, the second (not cumulative) on March 29.  The final exam is cumulative and it will be given at the time scheduled by the University.

 

I reserve the right to raise the calculated final grade of a student a quarter-grade (say, from a “B” to a “B+”) if I notice unusual effort or improvement over the course of the semester.

 

Read my lips: no makeups for exams.

 

Readings

 

I have asked the Coop to order Lynne Pepall, Daniel Richards, and George Norman, Industrial Organization: Contemporary Theory and Practice.  (South-Western, third edition, 2005).

My lectures will draw materials from specific sections of the above book through the semester.  Moreover, I will assign additional readings along the lecture.  Links will be put on the online version of the syllabus to many of these readings.  Many articles available on the web are in Adobe Acrobat (PDF) format. To read them, you will need the Adobe Acrobat reader. This should already be installed on University microlab computers. But if you don't have it, you can download it for free.

Note also that, for copyright reasons, some links are accessible only from computers connected to the Internet through the UConn domain. If you live off campus and are connecting through a private ISP, check with the computer center about something called a proxy server.

 

Sequence of Topics and Reading List

Date	Topic	Chapter
January 18	History of the Development of Organization of Industry	Chapter 1&3
January 25	Quiz #1 Perfect competition and Pure Monopoly: A Review	Chapter 2&4 Review the theory of perfect competition and monopoly in your 112 or 218 textbook.  I have put chapters from McEachern’s Microeconomics: A Contemporary Introduction on Electronic Reserve through WebCT.
February 1	Quiz #2 Monopoly Power: Price Discrimination	Chapter 5
February 8	Quiz #3 Monopoly Power: Price Discrimination (cont.)	Chapter 6
February 15 Wednesday, February 15	Midterm 1 6:00 – 8:45pm
February 22	Oligopoly and Game Theory	Chapter 9-11 Joseph A. Schumpeter, Capitalism, Socialism, and Democracy.  New York: Harper and Brothers, third edition, 1950, chapters VII and VIII.
March 1	Quiz #4 Oligopoly and Game Theory (cont.)
Spring break  March 5 –March 11
March 15	Quiz #5 Entry Deterrence	Chapter 12 Oliver E. Williamson, "Credible Commitments: Using Hostages to Support Exchange," American Economic Review 73: 519-40 (1983)
March 22	Quiz #6 Predatory Pricing	Chapter 13
March 29 Wednesday March 29	Midterm 2 6:00 – 8:45 pm
April 5	Mergers	Chapter 16
April 12	Quiz#7 Mergers (cont.)	Chapter 17
April 19	Quiz #8 Advertising.	Chapter 20-21
April 26	An introduction to Economics of Organization
	·                  Ronald Coase, “The Nature of the Firm,” Economica (N.S.) 4: 386-405 (November 1937). ·                  Oliver E. Williamson, “Markets and Hierarchies: Some Elementary Considerations,” American Economic Review 63 (2): 316-324 (1973) ·                  Benjamin Klein, Robert G. Crawford, and Armen Alchian, "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics 21(2): 297-326 (1978). ·                  Joskow, P.L. (1991) Asset specificity and the structure of vertical relationships: Empirical evidence. In: O.E. Williamson & S.G. Winter (Editors), The nature of the firm – Origins, evolution, and development. Oxford University Press. ·                  Symposium on the General Motors-Fisher Body case, Journal of Law and Economics, Vol. 43, No. 1, April 2000, especially the papers by Klein and Freeland.