Eric Fesselmeyer
AS2, #05-02
[email protected]
Semester 1, 2011/2012
ECS6322: Advanced Industrial Organization
This course provides a graduate-level introduction to modern empirical industrial organization. Some basic theory will be covered, but theory will mostly
serve as motivation for the empirical models that we review. Some of the
topics to be covered include estimating market power, hedonic analysis, differentiated goods markets, productivity, and single-agent dynamic models. We
will discuss papers, paying particular attention to the modeling approach,
identification, and estimation techniques used. This class should help improve students understanding of empirical research in general and particularly
in regards to understanding the advantages and disadvantages of structural
modeling (modeling based on theoretical models or first principles) versus
reduced-form analysis (regression models).
Lectures: Monday, 3-6pm, AS1-0201
Office hours: After class and by appointment
Grades:
• Problem sets (25%)
• Class participation and presentation of 2 papers. The papers marked with
a ? are suggested presentation papers. You can choose different papers
conditional on my approval. (25%)
• Final exam (50%) 25 November 2011 (Fri), 2.30PM
1
TENTATIVE COURSE OUTLINE
The papers marked with a I are the papers that I will discuss in class. For
some papers, you will not be expected to read the whole paper. I will let
you know a week in advance what you should read for the next class. We will
spend little time on the • papers, but you may find them useful as supplemental
reading.
Anything presented in lecture is fair game for the final exam, including papers
presented by students.
1
Structural Modeling
I P. Reiss and F. Wolak, “Structural Econometric Modeling: Rationales
and Examples from Industrial Organization,” Handbook of Econometric,
Vol. 6A, Chapter 63
• M. Keane, “Structural vs. Atheoretical Approaches to Econometrics,”
Journal of Econometrics, Vol. 80, 1, 3 - 20
• J. Rust, “Comments on: Structural vs. Atheoretical Approaches to
Econometrics,” Journal of Econometrics, Vol. 80, 1, 21 - 24
2
Market Power
I T. Bresnahan, “Empirical Studies of Industries with Market Power,”
Handbook of Industrial Organization, Vol. 2, Chapter 17
I T. Bresnahan, “The Oligopoly Solution is Identified,” Economics Letters,
1980, 10, 87-92
I D. Genesove and W. Mullin, “Testing Static Oligopoly Models: Conduct and Cost in the Sugar Industry, 1890-1914,” RAND Journal of Economics, 29(2), 1998, 355-377
I C. Wolfran, “Measuring Duopoly Power in the British Electricity Spot
Market,” American Economic Review, September, 1999, 805-26
3
Hedonic Models
I S. Rosen, “Hedonic Prices and Implicit Markets: Product Differentiation
in Pure Competition,” Journal of Political Economy, Jan./Feb., 1974,
34-55
2
I D. Epple, “Hedonic Prices and Implicit Markets: Estimating Demand
and Supply Functions for Differentiated Products,” Journal of Political
Economy, January, 1987, 59-80
I T. Bartik, “The Estimation of Demand Parameters in Hedonic Price Models,” Journal of Political Economy, January, 1987, 81-88
4
Differentiated Products and Static Oligopoly
4.1
Discrete Choice Models - Probit, Logit, Conditional Logit,
Nested Logit, Multinomial Probit, Random Coefficients Logit
• S. Stern, “Simulation-Based Estimation,” Journal of Economic Literature, December, 1997
Any graduate econometrics text such as
• Wooldridge, Econometric Analysis of Cross Section and Panel Data
• Greene, Econometric Analysis
4.2
BLP methodology
I S. Berry, “Estimating Discrete-Choice Models of Product Differentiation,” RAND Journal of Economics, 25, 1994, 242-262
I S. Berry, J. Levinsohn, and A. Pakes, “Automobile Prices in Market
Equilibrium,” Econometrica, 1995, 63, 841-890
I A. Nevo, “A Practitioner’s Guide to Estimation of Random Coefficient
Logit Models of Demand,” Journal of Economics & Management, 9, 2000,
513-548
• J-P Dube, J. Fox and C-L Su “Improving the Numerical Performance of
BLP Static and Dynamic Discrete Choice Random Coefficients Demand
Estimation,” working paper
• C. R. Knittel and K. Metaxoglou “Estimation of Random Coefficient
Demand Models: Challenges, Difficulties and Warnings,” working paper
4.3
Applications
I A. Nevo, “Measuring Market Power in the Ready-to-Eat Cereal Industry,”
Econometrica, Winter, 2000, 513-548
3
5
Student Presentations I
Possible papers to choose from:
? R. Porter, “A Study of Cartel Stability: The Joint Economic Executive
Committee, 1880-1886,” Bell Journal of Economics, 14, 1983, 301-314
? T. F. Bresnahan, “Competition and Collusion in the American Automobile Industry: The 1955 Price War,” The Journal of Industrial Economics,
June, 1987, 457-482
? A. Nevo, “Mergers with Differentiated Products: The Case of the Readyto-Eat Cereal Industry,” The RAND Journal of Economics, Autumn,
2000, 395-421
? A. Petrin, “Quantifying the Benefits of New Products: The Case of the
Minivan,” The Journal of Political Economy, August, 2002, 705-729
? P. Bajari and M. E. Kahn, “Estimating Housing Demand With an Application to Explaining Racial Segregation in Cities,” Journal of Business
& Economic Statistics, January, 2005, 20-33
? T. Bresnahan, S. Stern and M. Trajtenberg, “Market Segmentation and
the Sources of Rents from Innovation, The RAND Journal of Economics,
1997, S17-S44
? H. Smith, “Supermarket Choice and Supermarket Competition in Market
Equilibrium, The Review of Economic Studies, 2004, 71(1), 235263
? M. Rysman, “Competition Between Networks: A Study of the Market
for Yellow Pages,” The Review of Economic Studies, 2004, 71, 483-512
? M. Gentzkow, “Valuing New Goods in a Model with Complementarity:
Online Newspapers,” The American Economic Review, 2007, 713-744
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Single-agent Dynamic Models
I A. Pakes, “Patents as Options: Some Estimates of the Value of Holding
European Patent Stocks,” Econometrica, July 1986, 755-84
I J. Rust, “Optimal Replacement if GMC Bus Engines: An Empirical
Model of Harold Zurchner,” Econometrica, September 1987, 999-1033.
• Z. Eckstein and K. Wolpin, “The Specification and Estimation of Dynamic Stochastic Discrete Choice Models,” Journal of Human Resources,
1989, 562-98
4
7
Auctions
• H. Paarsch and H. Hong, An Introduction to the Structural Econometrics
of Auction Data, MIT Press, 2006
• H. Paarsch, “Deriving an Estimate of the Optimal Reserve Price: An Application to British Columbian Timber Sales,” Journal of Econometrics,
1997, 333-357
8
Student Presentations II
Possible papers to choose from:
? C. Timmins, “Measuring The Dynamic Efficiency Costs of Regulators’
Preferences: Municipal Water Utilities in the Arid West,” Econometrica,
2002, 603-629
? D. Ackerberg, “Advertising, Learning, and Consumer Choice in Experience Good Markets: An Empirical Examination,” International Economic Review, 2003, 1007-1040
? P. Goldberg, “Product Differentiation and Oligopoly in International
Markets: The Case of the U.S. Automobile Industry,” Econometrica, July,
1995, 891-951
? J. Cardon and I. Hendel, “Asymmetric Information in Health Insurance:
Evidence from the National Medical Expenditure Survey,” RAND Journal
of Economics, 2001, 408-427
? T. Erdem and M. Keane, “Decision-Making Under Uncertainty: Capturing Dynamic Brand Choice Processes in Turbulent Consumer Goods
Markets,” Marketing Science, 1996, 1-20
? L. Benkard, “Learning and Forgetting: The Dynamics of Aircraft Production,” American Economic Review, 2000, 1034-1054
? M. Wong, “Estimating Ethnic Preferences Using Ethnic Housing Quotas
in Singapore,” working paper, 2008
? P. Leslie, “Price Discrimination in Broadway Theatre,” RAND Journal
of Economics, 2004, 520-541
? B. McManus, “Nonlinear Pricing in an Oligopoly Market: The Case of
Specialty Coffee,” RAND Journal of Economics, 2007, 512-532
? P. Ellickson, “Does Sutton Apply to Supermarkets?,” RAND Journal of
Economics, 2007, 43-59
5
? A. Nevo and I. Hendel, “Measuring the Implications of Sales and Consumer Inventory Behavior,” Econometrica, 2006, 1637-1673
? P. Bajari and L. Ye, “Deciding Between Competition and Collusion,” The
Review of Economics and Statistics, 2003, 971-989
? H. Hong and M. Shum, “Increasing Competition and the Winner’s Curse:
Evidence from Procurement,” Review of Economic Studies, 2002, 871-898
? P. Bajari and A. Hortacsu, “The Winner’s Curse, Reserve Prices, and Endogenous Entry: Empirical Insights from eBay Auctions,” RAND Journal
of Economics, 329-355
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