ECON 0360 Syllabus/ Mitra - 1
Industrial Organization: Economics of Imperfect Competition
(ECON 0360)
Fall 2011
Aniruddha Mitra Office Hours:
Office: Warner 504 Tuesday 2 - 3:30 pm
Phone: 802- 443 – 3491 Thursday 2 – 3:30 pm
Email: amitra@[Link] And by appointment
Course Description: Industrial organization is the study of how industries function and
how firms interact within an industry. While this is part of the general agenda of
microeconomics, industrial organization distinguishes itself by its emphasis on the study
of firm behavior in imperfectly competitive markets. The primary objective of this course
is to investigate how firms acquire market power or the ability to influence the price of
their product; the strategic behavior of firms that possess market power; and the effect of
policy intervention in such industries.
Course Material: The required text for this course is Introduction to Industrial
Organization by Luis M.B. Cabral (The MIT Press). This being said, I must confess that I
shall occasionally depart from the material in the book. That is, I may decide to probe
deeper into a particular topic than the text does. I may also decide to cover a topic that the
text does not consider at all. In these situations, you will have to rely on the
supplementary material I make available and, of course, the notes you take down yourself
in class. Any additional material that I want you to look at will be posted in the
Handouts folder on the Classes server. Needless to say, you will be responsible for the
entire content of each chapter of the text covered in the course as well any additional
material I cover.
Course Outline: The topics I intend to cover over the course of the semester fall into
four general sections:
A. Introduction to Basic Market Structures: The first topic we shall take up
pertains to the scope of Industrial Organization as a discipline and how the nature
of the discipline has evolved from the conventional Structure Conduct
Performance (SCP) paradigm to the modern game-theoretic perspective.
Thereafter, we shall move on to a brief analysis of the canonical market structures,
namely, perfect competition; monopoly; and monopolistic competition. This part
of the course approximately corresponds to Chapters 1, 2, 5, and 6 in your text,
with the introductory topic being supplemented by my own lecture notes.
B. Introduction to Strategic Interaction: This section will introduce the study
of strategic behavior or game theory and provide a necessary perspective for the
material to follow. We shall briefly cover the basic tools of game theory and then
move on to the last major market structure, namely, oligopoly, which explicitly
ECON 0360 Syllabus/ Mitra - 2
looks at the strategic interaction between firms. We shall end this section with the
study of collusion or how firms attempt to reach agreements between themselves
with a view to increasing their market power. This part of the course
approximately corresponds to Chapters 4, 7, and 8. However, I will supplement
the material in Chapter 4 with my own lecture notes on game theory.
C. Strategic Behavior of Firms: This area defines the scope of modern industrial
organization. What we cover in this section, therefore, is by no means a
compendium of existing knowledge in the field, but a list of topics intended to
give you the briefest of glimpses into the discipline. Tentatively, we shall look
into price discrimination by a monopolist (Chapter 10); the impact of
differentiated products (Chapter 12); entry and exit decisions from an industry
(Chapters 14 and 15); the impact of advertising (Chapter 13); the decision to
invest in research and development (Chapter 16); and if time permits, the
behavior of a durable goods monopoly (my own lecture notes).
D. Theory of the Firm: A key question that industrial organization tries to
answer is what exactly is a firm? You will certainly have an idea about this from
past courses in microeconomics, but I hope to convince you about the need to
look deeper into the question. This part of the course will draw mainly on my own
lecture notes, which will subsume Chapters 3 and 11 of the text.
Problem Sets: I will assign approximately 6 problem sets over the course of the
semester. * I consider this an absolutely vital part of your learning experience. The
problem sets are intended to give you greater familiarity with the concepts we cover in
class. Equally importantly, they are intended to give you regular feedback about your
own progress in the course.
Each problem set will be posted in the Handouts folder on the Classes server a week
before the due date, and I expect to receive your submission at my office by 5:00 pm on
the date it is due. Please make sure that you keep the deadline. I do not accept a late
submission unless there is an absolutely unavoidable circumstance which gets you
excused by a Dean. On a more positive note, I will drop your worst score on the problem
sets and the rest will count towards your final grade for the course.
Feel free to collaborate on the problem sets. All I ask is that each of you should submit a
separate assignment.
Examinations: There will be one midterm and a final examination. The midterm will be
held between 7:00 and 9:00 pm on October 20 and will cover Sections A and B listed
above (Chapters 1 – 8). Please note that while the date of the midterm is fixed, there may
be changes in the coverage, depending on our rate of progress. In the event of any such
change, I shall inform you well in advance.
*
Note the word approximately.
ECON 0360 Syllabus/ Mitra - 3
The date of the final is yet undetermined and I will let you know as soon as I decide. The
final exam is not cumulative and will cover Sections C and D.
Grading: Your final grade in the class will depend on the problem sets, the midterm and
the final exam. The problem sets count for 30% of your total score in the course; † the
midterm counts for 35%; and the final counts for 35%.
The final letter grade you receive will be determined according to the following scale:
Grading Scale
Total Course Letter
Percentage Grade
93 – 100 A
90 – 92.9 A-
85 – 89.9 B+
80 – 84.9 B
75 – 79.9 B-
70 – 74.9 C+
65 – 69.9 C
60 – 64.9 D
0 – 59.9 F
Please note that there is no grade of C-. Nor is there a scope for extra points.
†
Remember I drop your worst score on the problem sets.
