Lecturer: Binglin Gong, Wen Cao

Office: SiyuanBuilding, Rm. 332, Rm.211

Phone: 25011080

Email: blgong@fudan.edu.cn

Office hours: Wednesday 9:30-11:30

Industrial Economics

(for undergraduate students)

Outline

This course is arelatively advanced undergraduate course in Industrial Organization. In thiscourse we will consider variations in the market structures away from extremesof perfect competition and monopoly. The discipline of IO has made enormousprogress since the early 1970s and we will try to address the substantialdevelopments since its inception. With increased globalization and the issuesof welfare the contemporary IO has a lot to say and a lot to discuss.Industrial organization is a very empirically oriented discipline these daysand we will try to accommodate as many real life examples as possible. Studentsare encouraged to bring forth real life examples.

As a prerequisite, youshould have taken intermediary microeconomics. Optimization and simple GameTheory will be frequently used in this course. At the beginning of this courseI will review some concepts and methods we need in the following studies. Youare also encouraged to read some related books and notes as a preparation.

Grading

Class Performance& Real Life Examples 30%

Assignments 30%

Final Exam 40%

Students areencouraged to relate real life problems to what we learn in class. You caneither bring them up by responding to my questions on class or writing themdown and submit them to me. You are also welcome to present your examples onclass.

Problem sets

There are going to besome problem sets. You are encouraged to work out problems individually. Alsothe problem sets would tend to be tough so you are encouraged to seek help fromme in case you face difficulty. Referring to online or printed solutions,getting tutors to solve the problems for you are prohibited. A very good aidfor solving the problem sets would be to have the class notes and refer to themdirectly.

Textbooks

The main textbook forthis course is: Industrial Organization: Theory and Applications by Oz Shy.

In addition you areencouraged to have a copy of the following textbook: ModernIndustrial Organization by Dennis W. W. Carlton and Jeffrey M. Perloff. Iunderstand that this book is relatively expensive. But it will be very helpfulfor understanding this class. You can reduce the cost by buying a used book orsharing the book with your classmates.

Theory of Industrial Organization by Jean Tirole is amore advanced textbook and may serve as an optional reading for those who havesome time and are eager to know more about industrial organization.

Most of the topicscovered in class follow Oz Shy’s book closely. Please beware that Shy book isrelatively advanced and would require careful reading. A good aid forunderstanding the texts better would be to use the handouts that will be givento you from time to time.

Syllabus

I. Basic Ideas relating to simple market structures

Foundations: Chapter3: Oz Shy

(a). Perfect Competition—Chapter 3: Carlton and Perloff

(b). Monopoly---Chapter 4: Carlton and Perloff (Monopsony and DominantFirms to be covered in short)

(c). Chapter 4: Perfect Competition: Oz Shy

(d). Chapter 5: Monopoly: Oz Shy

II. Variations relating to monopoly

PriceDiscrimination—Chapter 9: Carltonand Perloff, Chapter 5: Oz Shy, Chapter 13- Oz Shy, Chapter 14 (Briefly)

III. Oligopolistic Market Structures

Chapter 2: PrajitDatta, Chapter 5, Prajit Datta (Not referred but good for this section)

(a). Non-cooperative Oligopoly

(b). Cartel (to be done through examples and in short)

Chapters 5 and 6 inCarltonand Perloff

Chapter 6: Markets forHomogeneous Products- Oz Shy

IV. Product Differentiation

Chapter 7: Carlton and Perloff

Advanced Reading: Chapter 7—Theoryof Industrial Organization by Jean Tirole (Optional)(More emphasis onhorizontal differentiation)

Chapter 7: Markets fordifferentiated products-Oz Shy

V. Entry and Mergers

Chapter 8:Concentration, Mergers and Entry Barriers- Oz Shy

Chapter 19:Carlton and Perloff

VI. Advertising

Chapter 11: Advertising:Oz Shy

VII. Quality, Durability, and Warranties

Chapter 12: Quality,Durability, and Warranties: Oz Shy

VIII. Price Dispersion and Search Theory

Chapter 16: PriceDispersion and Search Theory: Oz Shy

IX. Pricing Tactics

Chapter 13: Pricing Tactics:Two-Part Tariff and Peak-Load Pricing: Oz Shy

X. Marketing Tactics

Chapter 14: Marketing Tactics: Bundling, Upgrading, and Dealerships: OzShy

XI. Moral Hazard

Chapter 15: Management,Compensation, and Regulation: Oz Shy

XII. Compatibility and Standards

Chapter 10: TheEconomics of Compatibility and Standards: Oz Shy

XIII. Network Externalities & 2-sidedMarkets