Industrial Organization

See the Friday course here.

Lecturer: Lszl . Kczy
Time: Tuesdays*, 1140-1320
Room: TG204
Prerequisits: No formal restrictions, but students are advised to take the course if they have followed an introductory course to Microeconomics.
Student hours: Tuesdays, 1115-1130 (or by appointment) in TC212

*No class on 10 April and 1 May 2012.

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Course Outline


Topic Chapter Homework Ex.


Introduction: What is industrial organization? A recap of basic microeconomics.

1-2 2.2, 2.9


The firm. A brief introduction to games and stratiegies.

3-4 3.8, 4.6


Monopoly and regulation.

5 5.2, 5.5


Perfect (or almost perfect) competition.



Oligopolistic competition

7 7.5



8 8.2, 8.5


Market structure and market power

9 9.1


Price discrimination

10 10.6, 10.7


Product differentiation






Entry costs, market structure and welfare



Strategic behaviour, entry and exit



Research and development



Networks and standards


The schedule might change when a class is cancelled due to a teaching holiday.
*=Optional topics if time permits.

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Course book (you are strongly advised to get a copy):

Cabral: Introduction to Industrial Organization, MIT Press, 2000. 292 pages. ISBN-10: 0262032864. ISBN-13: 978-0262032865

Additional, recommended literature:

Tirole: The Theory of Industrial Organization, MIT Press, 1988. 479 pages. ISBN-10: 0262200716. ISBN-13: 978-0262200714.
            An excellent, though very advanced book on the theory of Industrial Organization.

Viscusi: Economics of Regulation and Antitrust, 4th Ed., MIT Press, 2005. 953 pages. ISBN-10: 026222075X. ISBN-13: 978-0262220750.
            In case you thought Tirole is long... This book has a more general purpose, covers other topics as well, but is interesting for its applications of IO.

Motta: Competition Policy: Theory and Practice, Cambridge University Press, 2004. 704 pages. ISBN-10: 0521016916. ISBN-13: 978-0521016919.
            A more policy-oriented and more recent version.

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Course evaluation

Open book, written exam.
The exam contains 3 exercises of equal weight where the student is expected to demonstrate the understanding of the concepts of the course as well as to apply this understanding to analytical problems similar to those in the textbook. The exam is in English, but the quality of English in the solutions has little influence on the grades.

Students have the possibility to replace one of their exam questions by an essay of 8-10 pages on a pre-approved IO topic. The essay can be written by a group of (max 2) students who will receive the same grade for the essay. The essay must be handed in before 10 am on the last Friday of the teaching period both electronically and in print. The student then indicates in the exam which question is to be replaced.

The written exam is evaluated as follows:
0-49%: fail (1)
50%-62%: pass (2)
63%-74%: good (3)
75%-84%: very good (4)
85%-100%: excellent (5)
Once the grades are available an inspection hour will be organised.

Resits: In line with faculty regulations, after due fees paid, resit at the time organised by the course coordinator. The form of the exam depends on the number of students taking it: normally oral, for a large number of students, possibly written.

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Some old exam questions: letolt\exam_OLD.pdf (You can solve about half of these questions: the essay questions and some of the simpler calculations. We have not covered limit pricing ad you are not expected to be able to solve a model with price discrimination.)