Syllabus 2007/2008 TEK140

Syllabus academic year 2007/2008

ECONOMICS, INDUSTRIAL ORGANIZATION

TEK140

Higher education credits: 7,5. Grading scale: TH. Level: G2 (First level). Language of instruction: The course will be given in English. TEK140 overlap following cours/es: NEK603 och NEKK16. Optional for: I3ai. Course coordinator: Professor Jerker Holm, jerker.holm@nek.lu.se, Nationalekonomiska inst. Prerequisites: Basic knowledge of English is required, Mikroekonomi för tekniker (VFT120, TEK115 or TEK116). Assessment: Students are evaluated in a written exam at the end of the course. During the course, there is a non-mandatory exercise that give credits that are added to the score on the written exam. Credits from the exercise are only valid during the term in which the exercise was performed. Further information: Corresponds to NEK603. For more information please contact the Department of Economics. Home page: http://www.nek.lu.se.

Aim
The purpose of the course is to introduce some prominent models and tools that are used in the field industrial organization and to give an overview of important issues and empirical results in the field.

Knowledge and understanding
For a passing grade the student must

acquire basic understanding and knowledge of:

the terminology used in industrial organization.
the concept of market structure and the problems associated with it.
variuos forms of price discrimination.
various strategies for differentiating and selling products.
the theory of oligopoly.
strategies intended to limit competition.
various forms of mergers and take-overs among firms and their consequences.
vertical limitations among firms.
the economic analysis of R&D and patents.

Skills and abilities
For a passing grade the student must

acquire the skill and ability to:

explain the relevant terminology using his or her own words.
apply simple measures of market structure.
analyse simple problems of price discrimination.
account for and analyse models regarding horizontal and vertical product differentiation.
account for and analyse the effects of packaging and so-called tie-ins.
apply simple models of oligopoly and draw conclusions on the basis of them.
explain the basic theory of cartels and other measure for limiting competition.
analyse the reasons for and consequences of mergers.
explain how vertical problems arise and how they can be solved.
explain various theories of how R&D depends on the market structure and reasons and strategies underlying the use of patents.

Judgement and approach
For a passing grade the student must

develop a critical attitude towards economic models within the field industrial organization. This attitude emphasizes that many situations can be analysed with the same theoretical tools but that details in the models can be crucial for the conclusions reached.

Contents
The course contains an overview of the theoretical tolls and models used to analyse issues of how firms act on markets towards consumers and other firms. In many cases, the course focuses on models of markets that are more specific and more realistic than traditional microeconomic theory where general results often are emphasized. After the analysis of the concept of market structure, the course mainly consists of three parts. The first part analyses how a monopolist exploits its market power through price discrimination, horizontal and vertical product differentiation and the offering of packages. The second part contains a strategic analysis of how firms interact with each other according to the traditional theory of oligopoly and according to newer models based on non-cooperative game theory. This part also contains the law governing restrictive practices and recent cases of cartels and misuse of a dominant position from an economic perspective. The third part concerns contractual agreements among firms. The focus is on various forms of vertical contracts such as vertical pricing and exclusive territories, but horizontal contracts are also analysed. Finally, theories on R&D and patents are treated.

Literature
Pepall, L., Richards, D. & Norman, G.: Industrial Organization: contemporary theory and practice. South-Western College Publishing, 2005, 3rd edition.
(ISBN-0324261306)
Supplementary material.