230359 :Industrial Organization Theory (CentER)

General info

Instruction language English
Type of Instruction interactive lectures (Lecture schedule)
Type of exams referee report (No data available yet)
Level:Master
Course load:3 ECTS credits
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Lecturer(s)


prof. dr. J. Boone (Coordinator)


Objectives

To understand models with bargaining externalities and be able to work with such models.


Contents

This half-semester course is concerned with the modern theory of industrial economics. It aims to provide students with a short, yet relevant, overview of contracting issues in industrial organization (IO). In particular, we focus on situations where agents (firms) bargain with externalities. Examples include upstream firms selling in downstream markets and the use of exclusionary contracts in this setting, firms bargaining about sharing intellectual property rights, a shareholder buying more than 50% of a firm's shares to take control, companies selling insurance to consumers. In all of these cases, the actions of a firm have externalities on other firms. The way the bargaining is organized has a big effect on the outcome and the efficiency of the outcome.

Relevant aspects include: which side (say, of the market) makes the offer, are offers public or private, is it possible to make different offers to different parties, are offers made simultaneously or sequentially? If offers are private, how does one firm form beliefs about the offer to its competitor? The course will explain the effects of these different assumptions and how they affect the outcome.

As an illustration, early on the Chicago school offered a theory claiming that exclusionary clauses in contracts do not enhance market power. The argument was: if such an offer would raise market power, it should not be accepted in equilibrium. It turns out that this result hinges on a number of important assumptions on the bargaining environment. Under more realistic assumptions, exclusionary clauses can foreclose competitors and hence raise market power. This latter result turns out to be rather robust. Hence the details of the bargaining environment should affect a competition authority's evaluation of exclusionary clauses in contracts. This is an exciting and challenging new literature in IO. The insights from this literature also apply outside the IO context.


Specifics

Before enrolling all non-CentER students should ask permission to the Director of Graduate Studies in Economics. Please send your request for permission to CentER Graduate School at center-gs@uvt.nl.


Compulsory Reading

  1. Students read the papers we discuss in class.


Required Prerequisites

A solid background in micro-economics, such as Micro-economics 1, 2 and 3 in the CentER Research Master Economics year 1 program


Recommended option for

(25-aug-2017)