ECO4316 Industrial Economics and Competition Policy
First Semester, 2016/2017
Lecture: Tuesdays: 15:30-17:20
Lingnan University
Prof. Ping Lin, WYL225, Tel.: 2616-7203 Office Hours: Tue: 14::00-16:00
Email: [email protected]
Wed: 13:30-15:20
or by appointment
SYLLABUS
Objectives
This course provides the students with (1) a good understanding of how economists analyze
competitive strategies of business firms; and (2) the basic knowledge about the public policies
(competition policy and regulatory policies) that developed countries adopt in order to promote
competition, innovation and economic efficiency, as well as to safeguard consumer interests.
Prerequisite(s): a) ECO2101 Introduction to Economics, or (b) BUS2105 Microeconomics for Business and
BUS2108 Global Business Environment
Key Reference：Dennis W. Carlton and Jeffery M. Perloff, Modern Industrial
Organization,
4rd edition, N.Y.: HarperCollinsPublisher, 2004
Textbook’s web site: http://wps.aw.com/aw_carltonper_modernio_4/
Lecture notes will be provided in Moodle/lectures
Learning Outcomes:
Upon complection of this course, students are expected to be able to
- Understand the best concepts, methodology, and theories in industrial economics;
- Use industrial economics to undertand observed firm competitive strategy, innovation,
and industry dynamics in real-life;
- Understand the main rationales for and the roles of competition policy; and
- Participate in meaningful discussions about the public policies toward competition and
consumer welfare.
Assessment
Continuous Assessment
Mid-term test/Quizzes/Assignments
Group project
Final Examination
50%
30%
20%
50%
100%
Total
Course Schedule:
Week 1.
Introduction
Structure-Conduct-Performance
The Chicago School
Firms and Cost
Economies of Scale
Economies of Scope
1
Ch. 1
Ch. 2
Week 1-2
Basic Theory
Competition
Barriers to entry
Contestability
Monopoly and Market power
Deadweight loss of Monopoly
Rent Seeking
The Benefits of Monopoly
Natural Monopoly
Theory of Dominant Firms
Ch. 3
Ch.4
Ch. 4
Week 2-3
Cartel Agreements
Ch. 5
Factors Facilitating Cartel Formation
Enforcing a Cartel Agreement
Prisoners’ Dilemma
Case Studies
Collusion in Mobile Phone Services in HK
Week 4
Noncooperative Oligopoly
Game Theory
Cournot Quantity Setting
Stackelberg Quantity Leadership
Ch. 6
Week 5
Product Differentiation
Product Differentiation and Market Power
Optimal Diversity
Case Study: The Jeans Market
Ch. 7
Week 6
Price Discrimination
Ch. 9-10
Third-Degree Price Discrimination
Non-Linear Pricing
Tie-In Sales
Examples: Coupons
Does Competition Always Lower Prices?
Week 7
Strategic Behavior
Ch. 11
Predatory Pricing
Limit Pricing
Raising Rival’s Costs
Practices that Facilitate Collusion
Examples: The Google case
Midterm Test:
Week 9
Wednesday, 19 Oct. 2016
Mergers/Antitrust Laws and Regulation
Social costs and benefits of mergers
The Williamson proposal
2
Ch. 19-20
Public policy toward mergers
Case study: Acquisition of Sunday by PCCW (2005)
Week 10-11
Vertical Integration and Vertical Relationships
Ch. 12
Motivations for Vertical Integration
Problem of Double Marginalization
Possible Anti-Competitive Effects of Vertical Relationships
Franchising
Case Studies： On-line vertical restraints (travelling booking, e.g.)
Week 12
Information, Advertising, and Disclosure
Ch. 13-14
The market for “Lemons”
Information and Product Quality
Social Benefits and Costs of Advertising
Advertising as a Barrier to Entry
Examples: Understanding Consumer Information
Welfare Effects of Restricting Alcohol Advertising
Week 13
Patent and Technological Change
Ch. 16
IPR (Patent, Trademarkets, and Copyrights)
Relationship Among Market Structure, Firm Size, and R&D
The Economics of Patent System
Case Studies: Mickey Mouse Legislation
Week 14
Economics of Competition in New-Technology Economy
Two-sided Markets
Network Economics
Pricing Strategy of Dominant Firms
Examples: Social Media
Supplementary Readings:
Group Projects
Working on a group basis, you will choose to write a research paper (about 15 pages long) on a
topic in the field of industrial economics. Provide your own analysis using the methodology,
approaches and techniques developed in this course. Your group will present your research
output in tutorial sessions. Also, you are required to provide individual comments on one of the
other projects at the time of their presentation. Your paper is due on the last week of term, and
must be in English.
Sample topics:
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Examination
Learning
Outcome
Understand
the
basic
concepts,
methodology and
theories of modern
industrial
economics
ExcellentA-, A
Able to
demonstrate
a thorough
understanding of
the basic concepts,
methodology, and
theories.
Ability to undertand
observed firm
competitive strategy,
innovation, and
industry dynamics.
Always able to use
industrial
economics to
undertand observed
firm competitive
strategy,
innovation, and
industry dynamics.
Undertand
the
rationales for and
roles of public
policy
in
the
market place
Always able to
undertand the
rationales for and
roles of public
policy in the
market place
Participate
in
meaningful
discussion
of
competition policy
Always able to
evaluate in a
sensible way the
competition
impacts of business
behavior and to
articulate for the
need for
competition policy.
Assessment Rubrics
Good B- to B+
Acceptable C- to C+
Able to
demonstrate
a good
understanding of
the basic
concepts,
methodology and
theories.
Usually able to
use industrial
economics to
undertand
observed firm
competitive
strategy,
innovation, and
industry
dynamics. .
Able to
demonstrate a
good
understanding of
the rationales for
and roles of
public policy in
the market place
Able to evaluate
the competition
impacts of
business behavior
and to articulate
for the need for
competition
policy.
Able to demonstrate
a basic understanding
of basic concepts,
methodology and
theories,.
Sometimes able to use
industrial economics
to undertand observed
firm competitive
strategy, innovation,
and industry
dynamics.le.
Able to demonstrate a
basic understanding of
the rationales for and
roles of public policy
in the market place
Able to participate in
some discussionof the
competition impacts of
business behavior and
to articulate for the
need for competition
policy.
Poor D or below
Unable to
demonstrate
littile
understanding of
the basic
concepts,
methodology and
theories
Fail to use
industrial
economics to
undertand any
observed firm
competitive
strategy,
innovation, and
industry
dynamics.
Fail to show any
understand of the
rationales for and
roles of
competition
policy.
Unable to
participate in any
meaningful
discussion of
business behavior
and competition
policy.
WARNING
With regard to your coursework in particular, you are reminded: You must note the
sources of quotations, data and general information in the essay. These
sources/references should appear in alphabetical order in your list of
references/bibliography.
According to Lingnan University and Social Sciences Programme policy, plagiarism is
"presentation of another person's work without proper acknowledgment of the
source". Plagiarism (unattributed copying) will be heavily penalised and may attract a
zero mark and disciplinary action.
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