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Department of Economics
ECON 5301 W
Industrial Organization I
Winter 2013
Instructor: Zhiqi Chen
Office: D895 Loeb Building
Phone: 613-520-2600 extension 7456
Email: z_chen@ carleton.ca
Office Hours: Mondays 11:00 12:00, and Tuesdays 11:00 12:00


Course Description

An examination of theories pertaining to industrial organization and their application by way of empirical
studies. Topics include oligopoly theory, product differentiation, and strategic behaviour.

Text

Martin, Stephen, Advanced Industrial Economics, 2
nd
edition, Oxford: Blackwell Publishing, 2001

Other Useful References

Church, J effrey and Roger Ware, Industrial Organization: A Strategic Approach, Boston: Irwin McGraw-Hill
1999 (available online at http://homepages.ucalgary.ca/~jrchurch/page4/page4.html)

Tirole, J ean, Theory of Industrial Organization, Cambridge: MIT, 1988

Topics

I. Introduction

Church and Ware Ch.1; Martin Ch.1

R. Schmalensee Industrial economics: An overview, The Economic Journal, 98 (September 1988),
643-81

II. Oligopoly Theory

Church and Ware Ch. 8 and 10; Martin Ch. 2 and 3

Dixit, A. Comparative statics for oligopoly, International Economic Review, 27 (February 1986),
107-22
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III. Dominant Firm and Market Power

Church and Ware, Chapter 4

Berck, P. and J . Perloff (1988) The dynamic annihilation of a rational competitive fringe by a low-
cost dominant firm, Journal of Economic Dynamics and Control, 12: 659 678

Chen, Z. (2003) Dominant retailers and countervailing power hypothesis, RAND Journal of
Economics, 34: 612 - 625

IV. Horizontal Product Differentiation and Monopolistic Competition

Church and Ware Ch. 11; Martin Ch. 4; Tirole Ch. 7

Hotelling, H.H. Stability in competition, Economic Journal, 39 (1929), 41-57; reprinted in G.
Stigler and K. Boulding (eds.) Readings in Price Theory, 1952

Spence, M. Product selection, fixed costs and monopolistic competition, Review of Economic
Studies, 43 (1976), 217-35

Dixit A. and J . Stiglitz Monopolistic competition and optimum product diversity, American
Economic Review, 67 (1977), 297-308

DAspremont, C., J .J . Gabszewicz, and J .-F. Thisse, On Hotellings stability in competition,
Econometrica, 47 (1979): 1045 - 1050

Salop, S. (1979), Monopolistic competition in with outside goods, Bell Journal of Economics, 10:
141 - 156

V. Vertical Product Differentiation

Gabszewicz, J .J . and J .F. Thisse (1979) Price competition, quality and income disparities, Journal
of Economic Theory, 20: 340 359

Shaked, A. and J . Sutton (1982) Relaxing price competition through product differentiation,
Review of Economic Studies, 49: 3 13

Shaked, A. and J . Sutton (1983) Natural Oligopolies, Econometrica, 51: 1469 1484

VI. Entry Deterrence

Church and Ware Ch.14; Martin Ch. 8

Spence, A.M., Entry, capacity investment, oligopolistic pricing, Bell Journal of Economics 8
(1977) 534-44

Dixit, A., The role of investment in entry-deterrence, Economic Journal, 90 (March 1980), 95-106
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Klemperer, P.D., Entry deterrence in markets with consumer switching costs, Economic Journal,
97 (1987), 99 117

Rasmusen, E.B., J .M. Ramseyer and J .S. Wiley, J r. (1991) Naked Exclusion, American Economic
Review, 81: 1137 1145

Segal, I.R. and M.D. Whinston (2000) Naked Exclusion: Comment, American Economic Review,
90: 296 - 309

Chen, Z. and T. Ross, Strategic alliances, shared facilities, and entry deterrence, RAND Journal of
Economics, 31 (Summer 2000), 326 - 344

VII. Strategic Behaviour

Church and Ware Ch. 15 and 16; Martin Ch. 8

Fudenberg, D. and J . Tirole The fact-cat effect, the puppy-dog ploy, and the lean and hungry look,
American Economic Review Papers and Proceedings, 74 (May 1984), 361 - 66

Bulow, J .I, J .D. Geanakoplos, P.D. Klemperer Multimarket oligopoly: Strategic substitutes and
complements, Journal of Political Economy, 93 (J une 1985), 488 511

Aghion, P. and P. Bolton (1987) Contracts as Barriers to Entry, American Economic Review, 77:
388 - 401

VIII. Empirical Studies of Market Performance

Church and Ware Ch. 12; Martin Ch. 5, 6, 7

Nickell, S.J ., Competition and corporate performance, Journal of Political Economy, 104 (1996),
724 746


Evaluation

Midterm Examination I: 40% (To be held in class on February 5)
Midterm Examination II: 40% (To be held in class on March 19)
Term Paper: 20% (Due on April 9)

Standing in a course is determined by the course instructor, subject to the approval of the Faculty Dean. This
means that grades submitted by the instructor may be subject to revision. No grades are final until they have
been approved by the Dean.

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Plagiarism

Please be aware that plagiarism is serious offence at Carleton and should be recognized and avoided.
Plagiarism is defined as passing off as ones own idea, or product, work of another without expressly giving
credit to another. For further information, see Pammett on Plagiarism and Paraphrasing
at www.carleton.ca/economics/courses/writing-preliminaries.

Academic Accommodation

You may need special arrangements to meet your academic obligations during the term. For an
accommodation request the processes are as follows:

Pregnancy obligation: write to me with any requests for academic accommodation during the first two
weeks of class, or as soon as possible after the need for accommodation is known to exist. For more details
visit the Equity Services website http://www2.carleton.ca/equity

Religious obligation: write to me with any requests for academic accommodation during the first two weeks
of class, or as soon as possible after the need for accommodation is known to exist. For more details visit the
Equity Services website http://www2.carleton.ca/equity

Academic accommodations for students with disabilities: The Paul Menton Centre for Students with
Disabilities (PMC) provides services to students with Learning Disabilities (LD), psychiatric/mental
health disabilities, Attention Deficit Hyperactivity Disorder (ADHD), Autism Spectrum Disorders (ASD),
chronic medical conditions, and impairments in mobility, hearing, and vision. If you have a disability
requiring academic accommodations in this course, please contact PMC at 613-520-6608 or
pmc@carleton.ca for a formal evaluation. If you are already registered with the PMC, contact your PMC
coordinator to send me your Letter of Accommodation at the beginning of the term, and no later than two
weeks before the first in-class scheduled test or exam requiring accommodation (if applicable). After
requesting accommodation from PMC, meet with me to ensure accommodation arrangements are made.
Please consult the PMC website for the deadline to request accommodations for the formally-scheduled
exam (if applicable) at http://www2.carleton.ca/pmc/new-and-current-students/dates-and-deadlines/

You can visit the Equity Services website to view the policies and to obtain more detailed information on
academic accommodation at http://www2.carleton.ca/equity/