040026 UK Industrial Organization (BA) (2014S)

After the required Microeconomics and Game Theory classes, students should be familiar with the functioning and properties of perfectly competitive markets, where market participants act as price takers, and with the basic monopoly model. The basic game theory course should have made students familiar with the basic tools to sudy strategic interaction, namely Nash equilibrium and subgame perfection.
The course starts with the basic models of imperfect competition (Cournot, Bertrand and Stackelberg). The present course takes a theoretic approach and studies how market participants are aware of the influence of their decisions on others, taking optimal advantage of their information about the market and their competitors. The resulting market equilibrium heavily depends on the prevailing market structure -- the number of competitors, the cost structure, the choice of strategic decision variables (output, quality, location and/or price), the order of moves (sequential vs. simultaneous), product characteristics (like number of competing products and degree of product substitutability). Moreover, firms can influence market structure through advertising, product positioning, as well as through their investment on technology improvements and also by merging with or acquiring other firms.

The topics of the course will be presented by the lecturer. Problem sets will be distributed regularly through the course website. Some sessions will be devoted to the discussion of problems. Students are expected to read the material in advance so that there can be active interaction during the lectures. When problems are discussed, students are expected to have worked on the problem sets in advance. Students are expected to do the recommended readings to complement classroom discussion of the topics.

Target group: Bachelor Students in Economics (2. Studienabschnitt VWL).

Prerequisites: Microeconomics I (Mikroökonomie I) and Game Theory I (SpieltheorieI).