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Industrial Organization I

Industrial Organization I. Introduction. Welcome to ResEc 732. Introduction What is this course about? How will this course work? Course Overview. Industrial Organization I. Branch of Economics (Microeconomics) “Study of markets” (i.e. supply and demand) In Europe: Industrial Economics

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Industrial Organization I

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  1. Industrial Organization I Introduction

  2. Welcome to ResEc 732 • Introduction • What is this course about? • How will this course work? • Course Overview

  3. Industrial Organization I • Branch of Economics (Microeconomics) • “Study of markets” (i.e. supply and demand) • In Europe: Industrial Economics • Also: Market Economics/Organization • Some markets belong to other fields: • Labor, international, finance (applied micro)

  4. Industrial Organization I • Focus on supply: • Strategic interaction among firms (price, advertising, product introduction) • Imperfections: monopoly, oligopoly, etc. • Factors that contribute to imperfection: transaction costs, product differentiation. • Regulatory intervention • But, certain analysis require sophisticated demand models

  5. Industrial Organization I • Theoretical IO: • Supply parameters (e.g. costs) and demand parameters (e.g. elasticity) exogenous • Focus on market equilibrium. e.g.: • Equilibrium P and Q, advertising levels, entry • Assumptions to simplify reality (often extreme). E.g.: • Utility of consuming 1 unit is $x (for the whole population) • Objectives: Mathematical simplification to obtain broad qualitative predictions, e.g.: • A price increase reduces quantity demanded • Entry decreases prices

  6. Industrial Organization I • Empirical IO: • Consumers’ and firms’ actions are observed: quantity, price, advertising are DATA • A theoretical model of demand (and/or supply) is assumed • Model parameters are estimated (econometrics) • Objective: Estimates of a particular strategy/action or status quo. e.g.: • Price elasticity (% Δ P → % Δ Q?) • Market power (P-MC) • Welfare effects of product introductions

  7. Industrial Organization I • Focus of the Course: • Study economic principles of market imperfections • Price discrimination, oligopoly models, collusion, entry, vertical issues, product differentiation, market power, advertising • Understand implications of such imperfections: • Welfare, competition, public policy, etc.

  8. Industrial Organization I • Focus of theCourse: • Theory: • Main theoretical models and predictions are formally presented • Theory problem sets • Empirics: • Empirical papers and applications are presented and discussed in class • Hands-on problem sets with real data • News articles briefly discussed

  9. Class Format Syllabus: • Contact • No single textbook required. • Instead I will draw material from several sources (you don’t need to buy any specific book, unless you want to) • PPT slides + relevant chapters from books + journal articles are all you need.

  10. Class Format Syllabus: • Website: • http://courses.umass.edu/resec732/index.shtml

  11. Class Format

  12. Class Format Syllabus: • Grades: • Problem sets & assignments: ~ 7-8 (30%) • Midterm project (25%) • Class participation (journal article + participation) (20%) • Final project (25%) • Coming up with a research proposal (details to follow)

  13. Class Format • Journal Article presentation + class participation (20%): • Present article relevant to the class (I will assign these) • 30-40 minutes, PPT • Main ideas of the paper: motivation, methodology, contribution, results, limitations, further research • I will let you know which paper you are presenting and when.

  14. Class Format • Journal Article presentation + class participation (20%): • (roughly) every other Thursday, starting on Feb. 7 • Bring a 2-3 minute (verbal) summary of an article related to IO. We will share, discuss and, overall, keep ourselves up-to-date.

  15. Class Format • Other details: • Syllabus (especially references) may change as we move through topics. • I will announce changes on course webpage.

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