London School of Economics and Political Science (LSE)

Modules

99
Industrial Economics

Prerequisite – 28 Managerial economics or  66 Microeconomics

Theory of the firm.

Size and structure of firms: the technological view of the firm; the transaction costs-property rights approach; investment specificity, incomplete contracts and vertical integration; empirical evidence.

Separation of ownership and control: separation of ownership and control; managerial incentives; the limits to managerial discretion; foundations of the profit-maximisation hypothesis.

Firm conduct and market structure.

Short-run price competition: the Bertrand model; Bertrand competition with capacity constraints; the Cournot model.

Dynamic price competition: repeated interaction; collusion and cartel stability; theories of price wars; empirical analysis of market power and collusive behaviour.

Entry deterrence and entry accommodation: first-mover advantages and the value of irreversible decisions; strategies to deter entry; strategic substitutability vs. complementarity; a taxonomy of business strategies.

Product differentiation and non-price competition: horizontal product differentiation; brand proliferation and entry deterrence; vertical product differentiation.

Price discrimination: first-degree, second-degree and third-degree price discrimination; non-linear pricing; tie-in sales.

Vertical restraints: efficiency explanations for vertical restraints; vertical and horizontal externalities; vertical restraints as instruments that restrict competition; empirical evidence.

The determinants of market structure: theory of market structure in exogenous and endogenous sunk cost industries; technology and market structure; empirical evidence.

Competition policy and regulation.

Competition and industrial policy: competition policy in the EU, the USA and Japan; current issues in competition policy; industrial policy towards R&D.

Regulation: regulation of firms with market power under symmetric information; regulation under asymmetric information; liberalisation and regulation; empirical evidence.