Level:Part II (final year)
Course Convenor:Dr CF Elliott
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Curriculum Design: Outline Syllabusback to top
Lecture 1 Introductory Game Theory and Economic Applications I:
Pepall et al: Chapter 9
Dutta: Chapters 3, 4, 5 and 7
Church and Ware: Chapter 7
(a) Explain the concepts of a ?dominant' strategy, and a ?Nash' strategy.
(b) Give practical examples of the two foregoing strategy types.
Lectures 2 and 3: Introductory Game Theory and Economic Applications II: Market Power and Strategic Behaviour - Cournot, Bertrand and Stackelberg
Pepall et al: Chapters 9, 10 and 11
Dutta: Chapters 6, 11 and 13
Church and Ware: Chapter 8
(a) Explain the concept of ?subgame perfection'.
(b) Distinguish analytically between a finitely and an infinitely repeated game.
(c) Identify the Cournot, Bertrand and Stackelberg equilibria (and their relative magnitudes in terms of price and output) in a framework of linear cost and demand curves.
(d) Identify the foregoing equilibria in a reaction function framework
(e) Explain why price leadership in a Stackelberg game is inferior, in terms of the leader's profits, to price followership, and why this result is reversed in a Cournot game.
Lecture 4: Introductory Game Theory and Economic Applications III: Entry Barriers: Sources, Classification and Strategic Entry Deterrence.
Pepall et al: Chapter 12
Church and Ware: Chapters 13,14 and 15
(a) Explain the concepts of ?blocked', ?effectively impeded' and ?ineffectively impeded' entry.
(b) Show how firms might use ?commitment' to make a threat to deter entry credible.
(c) Explain the concepts that underpin the ?taxonomy' of ploys that firms might use to deter, or, if necessary, accommodate new entrants.
Lecture 5: Introductory Game Theory and Economic Applications IV: Cartels, Cheating and Deterrence
Pepall et al: Chapters 14 and 15
Dutta: Chapters 14 and 15.
Church and Ware: Chapter 10
(a) Why are cartels typically unstable?
(b) Show how the maintenance of cartel stability can be modelled as a repeated game, with particular emphasis on the role of ?time'.
(c) Identify some of the issues that might affect firms' ability to coordinate on a cartel price even in the presence of ?trigger strategies'.
Lecture 6: Introductory Game Theory and Economic Applications V: Product Differentiation and Advertising
Pepall et al: Chapters 7, 16 and 20
Church and Ware: Chapters 11 and 17
(a) In what sense might product differentiation be a ?strategic' variable?
(b) Is it possible to identify an ?equilibrium' in product varieties?
Lecture 7: Merger
Pepall et al: Chapter 16
Church and Ware: Chapter23
What is the ?merger paradox'? Discuss the ways in which it might be overturned.
Lectures 8 and 9: R&D and Networks
Pepall et al: Chapters 22 and 24
Dutta: Chapter 12
Church and Ware: Chapter 18
(a) Discuss the importance of ?spillovers' in the context of R&D
(b) What is meant by the terms ?excess inertia' and ?excess momentum'? Explain how these phenomena might arise.
Lecture 10: Incentives within organisations ? the ?Principal-Agent' problem.
Dutta: Chapter 19
Choose ONE of the following topics. The essays will be written under ?timed' (closed-book) conditions, between 12 and 2pm on Wednesday 12 December, 2007. Further details will be provided early in the Michaelmas Term.
1. Explain why, and how, the behaviour of an incumbent firm towards a prospective competitor may be different according to whether the former wishes to deter or accommodate the latter.
2. Show why cartels are inherently unstable. Explain the possible importance of the ?time dimension' in determining the behaviour of prospective deviants, and the possible responses of ?loyal' firms.
3. Discuss the ways in which the ?product' may itself be a strategic variable.
4. What is meant by the ?merger paradox'? How might it arise, and in what ways might it be overturned?
Educational Aims: Subject Specific: Knowledge, Understanding and Skillsback to top
Course objectives: To introduce students to aspects of 'strategic' behaviour by firms in regard to competitors, advertising and product differentiation, merger, R&D, networks and employees
Learning Outcomes: Subject Specific: Knowledge, Understanding and Skillsback to top
Learning Outcomes: By the end of this course, students should have knowledge and understanding of important contemporary themes in industrial economics. In particular, they will understand the crucial role of strategic thinking on the part of firms, across a range of activities both within and without the organisation.
At a pedagogic level, students should be able to:
- Plan and manage their time effectively in relation to deadlines whilst displaying individual initiative and enterprise
- Conduct individual assignments and perform effectively, where appropriate, in a group environment.
- Communicate and present complex arguments in oral and written form with clarity and succinctness
- Work effectively both individually and, where appropriate, within a team environment
Assessment: Details of Assessmentback to top
Exam - 67%
Coursework - 33%
Coursework will consist of a project as follows:
Select 3 quality newspaper articles on an industrial economics topic of your choice. Provide an introduction to the articles, setting out the theme of the articles and an overview of the topic in the industrial economics literature. Then present each article immediately followed by an analysis of the article. Do not re-describe the article. Rather, discuss how the article fits with, advances or disputes existing relevant literature. You are expected to consult and reference academic articles and texts beyond those listed in this coursepaper. The word limit is 2,500 words. Hence, expect to write approximately 1,000 words in your Introduction, and 500 words commenting on each article. You do not need a Conclusions section but you must provide a list of References.
In addition, you are expected to include an Appendix containing a further 10 newspaper articles. These should provide evidence of your reading throughout the module. The articles do not need to be on the same topic as your project, but should be relevant to the topics covered on ECON 331.
Examples of newspapers that may be appropriate include The Economist; The Financial Times; The Times; The Guardian; The Independent; The Telegraph; The Observer; The New York Times. Tabloid newspapers are not acceptable.
Curriculum Design: Select Bibliographyback to top
We refer on a regular basis throughout the course to three texts. These are:
L Pepall, D Richards and G Norman: Industrial Organization: Contemporary Theory and Practice (Third Edition) (Thomson-South-Western College Publishing, 2005).
P K Dutta: Strategies and Games (MIT Press, 1999).
J Church and R Ware: Industrial Organization: A Strategic Approach (McGraw-Hill, 1999)
It is very important that these texts be referred to frequently, and especially where indicated under the lecture headings.
Other useful references, which should be consulted regularly as ?background reading', are:
S Martin: Advanced Industrial Economics (2nd edition, Blackwell 2001)
D Besanko, D Dranove and M Shanley: The Economics of Strategy (Wiley 1996).
D W Carlton and J M Perloff: Modern Industrial Organization (HarperCollins 1994).
S W Davies, et al, Economics of Industrial Organisation (Longman) (Chapter 4)
Luis M B Cabral, Introduction to Industrial Organization (MIT Press 2000).