Econ 310: Industrial Organization
Professor Robert J. Lemke
Department of Economics and Business
Lake Forest College
Spring 2017, Copyright

Contact Information:

Office: 418 Young Hall
Phone: 847-735-5143
E-mail: lemke@lakeforest.edu
Web: http://campus.lakeforest.edu/lemke/

Course Description:

Econ 310: Industrial Organization. Analysis of the behavior of firms under different industrial structures - competitive, monopolistic, oligopolistic. An evaluation of antitrust policies and other government regulations of industry. Specific topics covered include advertising, auctions, networks, product differentiation, market standards, and vertical and horizontal integration. Prerequisite: Economics 210 with a grade of C- or better.

Industrial Organization (IO) concerns the organization of markets, pricing strategies of firms, the range of products a firm produces, the quality of a firm's products, competitive and non-competitive relationships between firms, etc. Questions we will ask include: How should firms price products? Should firms bundle the sale of products? Why might firms vertically integrate? What incentives do firms have to undertake R&D? When should firms form research joint ventures? How and why is advertising effective? The answers to these questions depend greatly on the extent of strategic interaction between firms. The answers also have efficiency consequences from society's perspective. We will spend considerable time investigating what regulatory options are available to governments, which ones are good (and which are bad), how regulations affect firm incentives, and to what extent governments can effectively intervene in markets.

Course Objectives and Expectations:

The intention of this course is to introduce students to a wide range of IO topics in a mathematically rigorous setting that requires students to think hard about abstract economic problems and to apply the solutions to real-world situations. Upon completion of this course, you will be able to discuss IO topics intelligibly including the economic role of the government as the regulator of industry. I expect you will welcome the challenges presented by the material and will push yourself to develop your analytical skills. I expect you will do the assigned reading prior to each class, and that you will spend the time necessary to understand the reading. I also expect you will at least try to work all of the problems by yourself. Group work is encouraged, but you must be a productive member of your group and be able to solve all of the problems on your own. In addition to relying on the fundamentals of Micro Theory, which I assume you remember, this class is mathematically intensive. At a minimum you need to be willing to develop your math skills. This includes learning how to engage in abstract mathematical modeling and using calculus.

Class:

Class meets 11:00 - 11:50 MWF in 309 Young Hall. Daily attendance and active participation in classroom discussions are expected. Class time is best characterized as interactive lecture. I expect students will be active in helping the lecture move through the material. I also expect you will ask pointed questions and try to answer the questions of your classmates.

Office Hours:

Office hours are from 1:00 to 2:00M, 12:00 - 2:00 WF, and by appointment. Outside of stopping by my office, the best way to contact me is by e-mail at lemke@lakeforest.edu. You can also phone my office (x5143) or my cell (847-224-8928).

Texts:

There is no formal textbook for the class. Rather, you must purchase your own copy of the lecture notes for $30. You can pay in the business office (North Hall) from 8:30 -3:30 or you can pay online with a credit card at http://secure.acceptiva.com/?cst=041a02. When you pay, you will be given or emailed a receipt. Take the receipt to 121 Young Hall where you will then receive a copy of the notes.

Problem Sets and Quizes:

Problem sets will be assigned frequently. You are encouraged to work the problem sets in small groups, turning in one set of neatly written answers. There will also be several take-home and/or in-class quizzes. Your performance on problem sets and quizes will determine 25 percent of your final grade.

Exams:

There will be four exams during the semester plus a final exam. The final exam is from 1:30 - 4:30 on Friday, May 5. Exams will determine 60 percent of your final grade (12% each). Make-up exams will be given only in unforeseeable and extraordinary situations.

Paper:

You are to write a paper concerning any IO topic of your choice. The paper must be well-written and clear. You will be graded essentially on how much you teach me about a subject. The paper should present an idea or an event and discuss the current understanding of the situation. You must clear the paper topic with me by February 17. This is not original research, so be sure to attribute what you say to appropriate sources.

The technical details are the following: max five pages (page six is references), title and name (and a bunch of writing) on the first page, times roman 12 point font throughout, double spaced, one inch margins, number all pages. You must have at least 3 non-Internet sources.

The paper is due at the start of class on Monday, April 17. Your paper will determine 15 percent of your final grade.

Grading Policy:

Your overall weighted percentage for the class will depend on problem sets and quizes (25%), exams (60%), and a paper (15%). The conversion of your overall percentage into a letter grade will follow the standard 90, 80, 70, 60 schedule with pluses and minuses assigned as usual.

Reading Assignments (Available on Moodle):

Anbarci, Nejat, Robert Lemke, and Santanu Roy, "Inter-firm Complementarities in R&D: A Re-examination of the Relative Performance of Joint Ventures," International Journal of Industrial Organization, Vol. 20(2), February, 2002, pp. 191 - 213.

Coase, Ronald H., "Durability and Monopoly," The Journal of Law and Economics, Vol. 15(1), April, 1972, pp. 143 - 149.

Dorfman, Robert and Peter O. Steiner, "Optimal Advertising and Optimal Quality," American Economic Review, Vol. 44(5), December, 1954, pp. 826 - 836.

Elzinga, Kenneth, "Chapter 4: Beer," in Walter Adams and James W. Brock (eds.) The Structure of American Industry, 11th Edition, Pearson Prentice Hall, New Jersey, 2005.

Gibbons, Robert, "An Introduction to Applicable Game Theory," The Journal of Economic Perspectives, Vol. 11(1), Winter, 1997, pp. 127 - 149.

Gul, Faruk, "A Nobel Prize for Game Theorists: The Contributions of Harsanyi, Nash, and Selten," The Journal of Economic Perspectives, Vol. 11(3), Summer, 1997, pp. 159 - 174.

Hotelling, Harold, "Stability in Competition," The Economic Journal, Vol. 39(153), March, 1929, pp. 41 - 57.

McMillan, John, "Selling Spectrum Rights," Journal of Economic Perspectives, Vol. 8(3), Summer, 1994, pp. 145 - 162.

Robinson, Joan, "What is Perfect Competition?" The Quarterly Journal of Economics, Vol. 49(1), November, 1934, pp. 104 - 120.

Schumpeter, Joseph A., "Chapter 7: The Process of Creative Destruction," in Capitalism, Socialism, and Democracy, 2nd Edition, Harper & Brothers, New York, 1947.

Shepherd, William G. and James W. Brock, "Chapter 9: Airlines," in Walter Adams and James W. Brock (eds.) The Structure of American Industry, 11th Edition, Pearson Prentice Hall, New Jersey, 2005.

Sherer, F. M., "Corporate Takeovers: The Efficiency Arguments," The Journal of Economic Perspectives, Vol. 2(1), Winter, 1988, pp. 69 - 82.

College Policies

Non-Discriminiation Policies
This class will be conducted in an atmosphere of mutual respect. I encourage your active participation and welcome both respectful discourse and reasoned debate. However, if your language or conduct at any time demonstrates a lack of respect for anyone’s race, gender, sexuality, culture, beliefs, or abilities, you will not be permitted to participate further.

Statement about Sexual Misconduct
Lake Forest College is committed to providing students with a safe learning environment. College policy prohibits sexual misconduct, including sexual harassment, discrimination, non-consensual sexual intercourse and contact, domestic and dating violence and stalking. More information regarding the College’s Policy can be found at www.lakeforest.edu/about.administration/sexualmisconduct/. As a responsible faculty member and as required by College policy and federal law, I will report incidents of sexual misconduct of which I am informed to the Title IX Coordinator, Julie Yura at yura@lakeforest.edu or 847-735-6009.

Statement about Disability Services
If you are a student who needs an accommodation because of a disability or medical or psychological condition that limits your ability to fully participate in this course, please contact Teryn Robinson, Assistant Dean of Faculty for Learning Support, to document your disability with the College and with me for this course. Academic accommodations should be reasonable and not alter the fundamental nature of this course. As it can take a week or more to arrange requested accommodations, you are encouraged to establish your semester accommodations as early in the semester as possible. Assistant Dean Robinson’s contact information is robinson@lakeforest.edu or 847-735-5167. For more information about services for students with disabilities at Lake Forest College, please see www.lakeforest.edu/academics/resources/disability/.