Classes MW 5:30-6:50

Office Hours MW 1-2:30 and by appoint.

Suite 7-89 998-0864, FAX 995-4218

This is a course in applied microeconomics. We will use the principles of microeconomic theory to help us understand the structure, behavior and performance of firms and markets in the American economy. To achieve this, we will analyze the alternative strategies for successful firms in various settings in this economy, as well as the influence of major government policies on the structure, behavior and performance of firms.

This is also a course on the economics of market power. We will explicitly assume that firms have significant influence over the price, the quantity, the quality, and the variety mix of the goods that reach the market. We will focus on four inter-related aspects of market power: i) the sources and limits of market power; ii) the decision-making of a firm that possesses market power; iii) the institutional aspects of industries with market power; iv) the role of public policy in such industries.

Finally, this is a course that analyzes strategic interactions among firms, and production units within firms. The main focus of the course will be on interactions among few agents, such as oligopolistic interaction. In such interactions among few agents, it is important for every agent to analyze the effect of his/her actions on others as well as the effect of other on him/her. To analyze these interactions among the few we will learn and use game theory. Game theory was developed to analyze situations with few agents where either cooperation or competition are potential outcomes.

The required books are, Dennis Carlton and Jeffrey Perloff, Modern Industrial Organization, Scott, Foresman and Co., 1994, (C&P), and John Kwoka and Laurence White, The Antitrust Revolution, Scott, Foresman and Co., 1989, (K&W). C&P will be our basic book. We will spend roughly 2/3 of the course covering material from this book. We will spend roughly the last 1/3 of the course discussing cases from K&W. Focusing on the cases, we will analyze current problems of antitrust laws governing competition in the US, as well as problems of regulation in the telephone and airline industries.

Week 1. Introduction. Methodology. Paradigms. C&P Ch. 1, 2.

Week 2. Costs. Perfect Competition. C&P Ch. 3, 4.

Week 3. Monopoly. Cartels. C&P Ch. 5, 6.

Week 4. Oligopoly. Game Theory. C&P Ch. 7.

Week 5. Differentiated Products. Monopolistic Competition. C&P Ch. 8.

Week 6. Strategic Behavior. Price Discrimination. C&P Ch. 10, 11, 12.

Week 7. Vertical Relations. C&P Ch. 13.

Week 8. Advertising. C&P Ch. 15.

Week 9. Technological Change and Intellectual Property Protection. C&P Ch. 17.

Week 10. Antitrust Laws. C&P Ch. 20.

Week 11. K&W cases 3, 9.

Week 12. Regulation. C&P Ch. 21.

Week 13. K&W cases 11, 12.

Week 14. K&W cases 13, 15.