OVERVIEW

This subject addresses central aspects of Industrial Economics and Economic Policy. Its first part focuses on the theoretical, i.e., mathematical and conceptual, models that are used to classify markets in terms of their structural features. Price setting strategies will be illustrated in the second part, which will be followed by relevant topics in competition policy, with reference to EU antitrust cases.

AIMS AND CONTENT

LEARNING OUTCOMES

The course provides an in-depth illustration of the relationship linking economic theory with business strategy on one hand, and with competition policy on the other. In the first part the analysis will present the main theoretical models that are used to classify markets as a function of several market features. The economic rationales underlying the use of price discrimination strategies will be presented in the second part of the course, which will be followed by the analysis of the forms of strategic behaviour that are the objects of competition policy and market regulatory interventions.

AIMS AND LEARNING OUTCOMES

On completion of the subject, the students will have acquired a thorough understanding of the dynamics of the competitive process involving strategic players, as well as the rationales that underpin the intervention of Antitrust Agencies. In particular, students will:

• Learn how to solve the mathematical models used to describe the competitive process in different market structures;
• Acquire the knowledge of Game Theory methods to analyze how strategic interaction shapes the nature of the market characteristics;
• Develop a knowledge of the variety of business strategies and learn to recognize them in real competitive scenarios;
• Communicate effectively their knowledge by familiarizing with the technical jargon that is used in professional economic analysis;
• Strengthen their ability to establish and maintain an ongoing learning process that builds on the knowledge acquired from this subject;
• Become autonomous and independent users of the conceptual and operative methods illustrated in the subject.

PREREQUISITES

Prior knowledge of Microeconomics and Mathematical Optimization is useful, but not compulsory.

TEACHING METHODS

Teaching is organized in class or online lectures. Students will be encouraged to discuss the business tactics and the competition policy cases that the Instructor will propose.

SYLLABUS/CONTENT

Part 1: Market Structures

Perfect Competition; Monopoly; Elements of Game Theory; Oligopoly: static and dynamic models, with and without differentiated products; Monopolistic competition with Address models.

Identifying and Assessing Market Power: methods for Market definition; The Structure-Conduct-Performance paradigm and its latest developments (Sutton’s Exogenous and Endogenous Sunk Costs).

Part 2 – Business Practices

Pricing strategies: First, Second, Third Degree Price Discrimination; using Two-Part Tariffs to price discriminate; Using Bundling and Tie-in sales to price discriminate; Intertemporal Price Discrimination. Price dispersion: the role of search and switching costs. Market with Network goods.

Part 3 – Strategic Behaviour and Competition Policy

Price Fixing (horizontal agreements): Cartels and the Sustainability of Tacit Collusion; identifying Collusion; Factors that facilitate Collusion.

Horizontal Mergers:  Unilateral Effects (excessive increase in market power); Coordinated effects; Merger Remedies (Divestitures, behavioural); Merger Policy in the EU. Case Studies.

Vertical Integration and Mergers: Exclusionary effects; Vertical Price Restraints; Non-Price Vertical Restraints.

RECOMMENDED READING/BIBLIOGRAPHY

Belleflamme, P. and Peitz, M. (2015). Industrial Organization. Markets and Strategies.  Cambridge University Press, Cambridge, UK.

Carlton, D. and Perloff, J. 2005. Modern Industrial Organization, Pearson

Davis, P. and Garces, E. (2010). Quantitative Techniques for Competition and Antitrust Analysis.  Princeton University Press, Princeton, NJ USA.

Motta, M. (2004). Competition Policy. Theory and Practice. Cambridge University Press, Cambridge, UK.

Pepall, Richards, Norma, Industrial Organization: Contemporary Theory and Empirical Applications. fifth edition, Blackwell Publishing, 2013.

Pepall, Richards, Norman, Calzolari, Organizzazione Industriale, McGraw Hill, III edizione, 2017.

TEACHERS AND EXAM BOARD

Exam Board

CLAUDIO ANTONIO GIUSEPPE PIGA (President)

GABRIELE CARDULLO

MAURIZIO CONTI (President Substitute)

LESSONS

LESSONS START

LECTURE START

February 2023

TIMETABLE

See EasyAcademy.

Class schedule

The timetable for this course is available here: Portale EasyAcademy

EXAMS

EXAM DESCRIPTION

Assessment will be based on two activities: 1) an intermediate online test that will take place immediately before or after Easter; 2) a closed-book written exam, comprising questions and numerical exercises on the topics covering the entire subject. The marks received from the two activities will count for, respectively, 40% and 60% of the final mark.

ASSESSMENT METHODS

Assessment will be based on two activities: 1) an intermediate online test that will take place immediately before or after Easter; 2) a closed-book written exam, comprising questions and numerical exercises on the topics covering the entire subject. The marks received from the two activities will count for, respectively, 40% and 60% of the final mark.

Exam schedule