ECO4032S
- Economics of Industry, Regulation and Firms
Course Information
The purpose of this course is a) to explore the competitive dynamics of
network industries, and b) to explore how one might regulate these industries to
improve social welfare. This is fundamental to those students interested in
working in these industries - be it the firms or the regulators (including the
competition agency). The component on competitive dynamics will cover topics
such as why software firms may encourage a degree of piracy, why television
stations tend to broadcast similar programs and schedule them at similar times,
how we might price Internet use, why telecoms companies overcharge each other
for network interconnection, why airlines engage in code-sharing arrangements
and develop hub-and-spoke systems, why a telecoms monopoly chooses not to serve
the whole market and how it can limit entry through its interconnection
strategy. The regulation component will look at socially optimal pricing of
natural monopolies, socially optimal access pricing for networks that are
interconnected, why regulators cannot achieve these social optimums and the
efficiency/rent trade-offs they face. Sectors covered in the course can be
varied to accommodate specific interests amongst the class.
Lectures
Wednesday, 9-10:45 am, Menz 13.
Syllabus and organisation
This course will be split into two parts of four and eight weeks,
respectively. Part I will be taught by Shakill Hassan, covering mainly theoretic
aspects of firms and oligopoly. Part II will be taught by James Hodge, and will
cover further topics in oligopoly, regulation and competition policy.
Required textbooks
[CW] Church, Jeffrey, and Roger Ware, Industrial Organisation A
Strategic Approach, Boston: Irwin McGraw-Hill, 2000
[T] Tirole, Jean, The Theory of Industrial Organisation, Cambridge,
Mass., and London: MIT Press, 1988.
Recommended
[BDS] Besanko, David, David Dranove, and Mark Shanley, Economics of
Strategy, second edition, New York: Wiley, 2000. [Non-technical treatment of
economics of firms and industrial organisation applied to business strategy]
[LT] Laffont, Jean-Jacques, and Jean Tirole, A Theory of Incentives in
Procurement and Regulation, Cambridge, Mass., and London: MIT Press, 1993.
[Advanced and rigorous treatment of modern agency-theoretic theory of
regulation]
[MR] Milgrom, Paul, and John Roberts, Economics, Organisation, and Management,
New Jersey: Prentice-Hall, 1992. [Extensive discussions of the economics of
organisations for economics and business students]
[SW] Schmalensee, Richard and Robert Willig (1989): Handbook of Industrial
Organisation, North Holland.
[S] Sutton, John (1991): Sunk Costs and Market Structure, Cambridge,
Mass., and London: MIT Press.
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