Industrial Economics

This subject is an introduction to the field of industrial organisation. Industrial organisation deals with the structure, management, and performance of firms and markets. It is concerned with firm behaviour and strategy, the implications of firm behaviour for economic efficiency, and the role public policy plays in promoting efficiency. Most of the time, models of perfect competition and monopoly fail to explain the composition and behaviour of most industries in modern capitalist economies. Our goal in this class is to depart from those two idealised models and to explain why industries are composed of a few large firms instead of many small ones. We will be looking at the strategic interactions between firms in a market, and analysing such market phenomena as price discrimination, product differentiation, price wars, mergers, vertical relationships between firms, advertising, entry and exit, and research and development. Whenever possible, we will try to study real-world applications of the theories that we learn in class.

• 1Explain and analyse the main issues and debates in the field of industrial economics;
• 2Describe the workings of different market structures;
• 3Critically evaluate different policy approaches to industry;
• 4Analyse the value and the limitations of existing theory in the area of industry economics;
• 5Explain the economic behaviour of different industries, firms and markets in relation to their output and pricing decisions;
• 6Analyse and provide policy recommendations about monopolies, cartels, non-cooperative oligopolies and other forms of imperfect competition; and
• 7Critically evaluate the relationship between industrial structure and performance and the various approaches to innovation, entrepreneurship and industry policy.