HU Credits: 3

Degree/Cycle: 2nd degree (Master)

Responsible Department: Economics

Semester: 2nd Semester

Teaching Languages: Hebrew

Campus: Mt. Scopus

Course/Module Coordinator: David Genesove

Coordinator Email: genesove@mscc.huji.ac.il

Coordinator Office Hours: T 16:30-19:00

Teaching Staff:
Prof David Genesove

Course/Module description:
Modern Industrial Organization: models and empirical tests of IO theory, including static and dynamic
oligopoly, strategic behaviour and deterrence, industry entry and exit, R&D, technological innovation,
standards and networks.

Course/Module aims:
To learn the above subjects and be able to apply theoretical and empirical models to real world markets.

Learning outcomes - On successful completion of this module, students should be able to:
To achieve the course aims.

Attendance requirements(%):
0

Teaching arrangement and method of instruction: Lectures

Course/Module Content:
1. Basic Models of Competition
2. Horizontal Competition and Endogenous Market Structure
Lecture 3: Free Entry Cournot and the Salop Model of the Circle
03/09/2013 Course Info
https://www4.huji.ac.il/htbin/teachers/updateSyllabuses.pl 7/10
Lecture 4: Market Size and Concentration: Empirical Evidence
3. Vertical Differentiation and Endogenous Sunk Costs
Lecture 5: Vertical Differentiation
Lecture 6: Endogenous Sunk Costs
4. Dynamic Oligopoly and Collusion
Lectures 7, 8: Collusion
5. Strategic Behavior
Lectures 8, 9: The Dixit Model of Capacity
Lecture 10: Most Favored Customer and Other Examples of Strategic Behavior
8. Standardization and Networks (Lecture 11)
9. Advertising and Media Markets (Lecture 12)
10. Technological Change and R&D (Lecture 13)
a) The Appropriability of Innovative Gains
b) The Efficiency and Replacement Effects, and R& D Races
c) The optimal design of intellectual property rights

Required Reading:
1. Basic Models of Competition
Tirole, Introduction (pages 1-14), Chapter 1 (pages 65-92, except Sections 1.1.3 and 1.5), Section 2.2
and Chapter 5 (except 5.7.1).
Lecture 1: The Bertrand and Cournot Models
Lecture 2: Fixed Costs, Natural Monopoly and Multiple Equilibria; the Kreps-Scheinkman Model
2. Horizontal Competition and Endogenous Market Structure
S. Anderson, A. de Palma and J.-F. Thisse, Discrete Choice Theory of Product Differentiation, The MIT
Press, Cambridge, MA 1992, Chapter 7.
Tirole, 7, except 7.3.
F. Pryor, "An International Comparison of Concentration Ratios," Review of Economics and Statistics, 54
(1972), 130-140.
Campbell and Hopenhayn, “Size Does Matter”, JIE, 2005, 53(1):1-25.
F. Schivardi and E. Viviano, “Entry Barriers in Retail Trade”, Economic Journal, 121 (March), 145–170.
J. Vogel , “Spatial Competition with Heterogeneous Firms”, JPE, 2008, vol. 116, no. 3.
C. Syverson, “Market Structure and Productivity: A Concrete Example”, JPE, 2004.
Mankiw and Whinston, “Free Entry and Social Efficiency”, RAND 17 (1), 48-58.
03/09/2013 Course Info
https://www4.huji.ac.il/htbin/teachers/updateSyllabuses.pl 8/10
Lecture 3: Free Entry Cournot and the Salop Model of the Circle
Lecture 4: Market Size and Concentration: Empirical Evidence
3. Vertical Differentiation and Endogenous Sunk Costs
Tirole, Appendix 7.5 (296-298)
S. Anderson, A. de Palma and J.-F. Thisse, Discrete Choice Theory of Product Differentiation, Chapter 8.
Chapter 8.3.2 (305-320).
J. Sutton. Sunk Costs and Market Structure: Price Competition, Advertising, and the Evolution of
Concentration, MIT Press, 1991. Chapters 3 and 5.
G. Symeonidies. “Price Competition and Market Structure: The Impact of Cartel Policy on Concentration
in the UK” Journal of Industrial Economics, 48 (2000), 1-26.
Lecture 5: Vertical Differentiation
Lecture 6: Endogenous Sunk Costs
4. Dynamic Oligopoly and Collusion
Tirole, Chapter 6, except sections 6.4 and 6.5.
V. Nocke and L. White, “Do Vertical Mergers Facilitate Upstream Collusion?” AER 1321-1339.
Yuliy Sannikov and Andrzej Skrzypacz, “Impossibility of Collusion under Imperfect Monitoring with Flexible
Production”, American Economic Review, 9(5), 1794-.
J. E. Harrington and A. Skrzypacz, “Private Monitoring and Communication in Cartels: Explaining Recent
Collusive Practices” AER 101 (October 2011): 2425–2449.
Genesove and Mullin, “Rules, Communication and Coordination: Narrative Evidence on Collusion”,
American Economic Review
Videos of Lysine Cartel meetings (“And one from the FBI … and seven from the FTC!”)
http://www.youtube.com/watch?v&eq;wDH0Rv8R0SQ&feature&eq;relmfu
http://www.youtube.com/watch?v&eq;ywNSPfb6w7M&feature&eq;relmfu
Lectures 7, 8: Collusion
5. Strategic Behavior
Tirole, Chapter 8, 8.6.1, 8.6.2.
Lectures 8, 9: The Dixit Model of Capacity
Lecture 10: Most Favored Customer and Other Examples of Strategic Behavior
8. Standardization and Networks (Lecture 11)
03/09/2013 Course Info
https://www4.huji.ac.il/htbin/teachers/updateSyllabuses.pl 9/10
Tirole: 10.6, pages 404-409. 335-336. (NOTE: OPTIONAL)
M. Katz and C. Shapiro, “Network Externalities, Competition, and Compatibility”, AER 75 (1985) 424-440.
Cremer, Rey and Tirole, “Connectivity on the Commercial Internet”, JIE December 2000, 433-472.
Sections IV and V only.
M. Katz and C. Shapiro, “Technology Adoption in the Presence of Network Externalities”, JPE 94 (1986)
822-841.
M. Armstrong and J. Wright, “Two-Sided Markets, Competitive Bottlenecks and Exclusive Contracts”,
Economic Theory, 2005.
9. Advertising and Media Markets (Lecture 12)
A. Glazer, “Advertising, Information and Prices - A Case Study” Economic Inquiry, 19:661-71, 1981.
D. A. Ackerberg, “Empirically Distinguishing Informative and Prestige Effects of Advertising”, RAND
Summer 2001.
Mark Stegeman. “Advertising in Competitive Markets”, AER 81:210-223, 1991. [Sections X and Y]
D. Genesove and A. Simhon, “Seasonality and the Effect of Advertising on Price”, mimeo, 2008
http://pluto.huji.ac.il/~msfalkin/discussion%202000.htm
10. Technological Change and R&D (Lecture 13)
a) The Appropriability of Innovative Gains
M. Schankerman, “How Valuable is Patent Protection? Estimates by Technology Field”, RAND, 29 (Spring
1998),
Scherer and Harhoff, “Technology Policy for a World of Skew-Distributed Outcomes”, Research Policy,
April 2000, 29(4-5): 559-66.
b) The Efficiency and Replacement Effects, and R& D Races
Tirole, Ch. 10, except 10.2.2 and 10.6
S. Athey and A. Schmutzler “Investment and Market Dominance”, RAND, Spring 2001, 32(1): 1-26.
c) The optimal design of intellectual property rights
S. Scotchmer, Innovation and Incentives, The MIT Press, 2004, Sections 5.2 and 5.4. (See Web site)
N. T. Gallini, “Patent Policy and Costly Imitation”, RAND Spring 1992, 23(1), 52-63.
I. Segal and M. D. Whinston, “Antitrust in Innovative Industries, AER 2007, 97(5); 1703-1730.
03/09/2013 Course Info
https://www4.huji.ac.il/htbin/teachers/updateSyllabuses.pl 10/10
P. Aghion, R. Blundell, R. Griffith, P. Howitt and S. Prantl, “The Effects of Entry on Incumbent Innovation
and Productivity”, ReStat 2009, 91(1):20-32.
Additional

Additional Reading Material:
None

Course/Module evaluation:
End of year written/oral examination 70 %
Presentation 0 %
Participation in Tutorials 10 %
Project work 0 %
Assignments 20 %
Reports 0 %
Research project 0 %
Quizzes 0 %
Other 0 %

Additional information:
None