Course Description Preclusions and Prerequisites

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The course is an introduction to industrial organization (IO). ... L. Pepall, D.J. Richards and G. Norman (2008), Industrial Organization, Contemporary Theory.

Fall 2013 Market Structure and Firm Behavior ECON 4301A Department of Economics Carleton University

Instructor Office Phone E-mail and website Office Hours Lectures

Konstantinos Metaxoglou B-849 Loeb 613-520-2600 X3755 Mon: 1:00pm–2:00pm Fri: 11:35am–2:25pm, 3235 Mackenzie

Course Description The course is an introduction to industrial organization (IO). At a very high level, IO studies industry structure and firm behavior when the assumptions of perfect competition do not hold. We will review and extend some basic results for monopoly and study the strategic interaction among a small number of firms and how such interaction affects market outcomes. Examples of the topics that we will cover include price discrimination, product variety, price and quantity competition, entry, collusion, and mergers. We will do so using analytical models from microeconomics and game theory. We will also discuss how public policy affects market structure and firm behavior.

Preclusions and Prerequisites Precludes additional credit for ECON 4300 (no longer offered). Prerequisite(s): ECON 2030 with a grade of C- or higher or ECON 2003 (no longer offered) with a grade of C- or higher. Students who believe they have taken a similar background course or courses from another university must provide appropriate documentation to the Department of Economics Undergraduate Advisor, Amanda Wright.


Textbook L. Pepall, D.J. Richards and G. Norman (2008), Industrial Organization, Contemporary Theory and Empirical Applications, 4th Edition, Blackwell.

Course Outline This is a tentative course outline and the topics covered may change slightly during the term. All chapters are from Pepall et al. (2008).

Topic Introduction/Basic Microeconomics Market Structure/Technology and Costs Monopoly: Linear Pricing Monopoly: Non-Linear Pricing Product Variety under Monopoly Bundling and Tie-in Sales Static Games Static Games (continued) Dynamic Games and Entry Deterrence Predatory Conduct Repeated Games and Collusion Mergers

Reading Ch. 1 & 2 Ch. 3 & 4 Ch. 5 Ch. 6 Ch. 7 Ch. 8 Ch. 9 & 10 Ch. 9 & 10 Ch. 11 & 12 Ch. 13 Ch. 14 & 15 Ch. 16 & 17

Evaluation Each student’s grade will be calculated as a weighted average of the following instruments:

Instrument Four assignments (5% each) Mid-term examination Final comprehensive examination

Weight 20% 30% 50%

Assignments: They must be submitted in the class on the due date. I will provide answer keys and the problem sets will be graded in a timely manner. As a result, I will not accept late assignments. Spending time on your own trying to solve the problems in the assignments is a very good way to understand the material and perform well in the class. Although you are permitted to discuss the 2

material with your classmates, you must ensure that the submitted work is your own; please see the statement on plagiarism below. Office hours offer a good chance to ask questions about the problem sets. The due dates for the four assignments are: Sep-20-2013, Oct-11-2013, Nov-08-2013, and Nov-29-2013, respectively. Mid-term examination: It will take place during the first 80 minutes of the class on Oct-18-2013. Final comprehensive examination: It will be 120-minutes long and will take place on Dec-062013 in class. Deferral: Students with a compelling reason for missing an assignment or the mid-term examination will be excused and their final grade will be based on their performance in the rest of the course—i.e., the weight of each of the remaining evaluation instruments will rise by a factor of Y = 100/(100 − X), where X is the weight of the missed evaluations. Students must inform the instructor of such an absence in advance, if possible.

Plagiarism Please be aware that plagiarism is serious offense at Carleton and should be recognized and avoided. For further information on how to do so, please see “Pammett on Plagiarism and Paraphrasing” at

Requests for Academic Accommodation You may need special arrangements to meet your academic obligations during the term because of disability, pregnancy or religious obligations. Please review the course outline promptly and write to me with any requests for academic accommodation during the first two weeks of class, or as soon as possible after the need for accommodation is known to exist. Students with disabilities requiring academic accommodations in this course must register with the Paul Menton Centre for Students with Disabilities (PMC) for a formal evaluation of disabilityrelated needs. Documented disabilities could include but are not limited to mobility/physical impairments, specific Learning Disabilities (LD), psychiatric/psychological disabilities, sensory disabilities, Attention Deficit Hyperactivity Disorder (ADHD), and chronic medical conditions. Registered PMC students are required to contact the PMC, 613-520-6608, every term to ensure that your Instructor receives your Letter of Accommodation, no later than two weeks before the first assignment is due or the first in-class test/midterm requiring accommodations. If you only require accommodations for your formally scheduled exam(s) in this course, please submit your request for


accommodations to PMC by Nov 8, 2013 for the Fall term. You can visit the Equity Services website to view the policies and to obtain more detailed information on academic accommodation at

Attendance I encourage you to attend the lectures and ask questions. I also recommend you spend time with the chapter of the book, as indicated in the course outline, prior to attending the lectures. Although my lecture slides follow closely the textbook, I will provide additional discussion of the various concepts that I will introduce.

Additional Readings For those interested in IO and competition/antitrust, these are some books that you may consider for additional background. You are not required to buy these books for the class. 1. P. Belleflame and M. Peitz (2010), “Industrial Organization: Markets and Strategies,” Cambridge University Press. 2. D.W. Carlton and J.M. Perloff (2005), “Modern Industrial Organization, 4th Edition,” Pearson. 3. P. Davis and E. Garces (2009), “Quantitative Techniques for Competition and Antitrust Analysis,” Princeton University Press. 4. S. Martin (2010), “Industrial Organization in Context,” Oxford University Press. 5. M. Motta (2003), “Competition Policy: Theory and Practice,” Cambridge University Press. 6. L. Pepall, D.J. Richards and G. Norman (2011), “Contemporary Industrial Organization: A Quantitative Approach,” Willey. 7. X. Vives (2001), “Oligopoly Pricing: Old Ideas and New Tools,” MIT press.