Tuesday/Thursday 1-2:45, Andersen 3245 (plus one make-up lecture TBA)

Transcription

1 Fall Aviv Nevo Michael Whinston Andersen 3223; Anderson 3230; : INDUSTRIAL ORGANIZATION AND PRICES I The course provides a graduate-level introduction to Industrial Organization (IO). It is designed to provide a broad introduction to topics and industries that current researchers are studying as well as to expose students to a wide variety of techniques. It will start the process of preparing economics Ph.D. students to conduct thesis research in the area, and may also be of interest to doctoral students in other fields. The course covers both theoretical models and empirical studies. Lectures: Course Web Page: Tuesday/Thursday 1-2:45, Andersen 3245 (plus one make-up lecture TBA) The required text for this course concentrates on theoretical principles: J. Tirole, The Theory of Industrial Organization, MIT, (Tirole). For a broader coverage of empirical and public policy issues, you should also read: D. Carlton and J. Perloff, Modern Industrial Organization, 3rd ed., Addison-Wesley, F.M. Scherer and D. Ross, Industrial Market Structure and Economic Performance, 3rd ed., Houghton Mifflin, K. Viscusi, J. Vernon and J. Harrington, Economics of Regulation and Antitrust, 3rd ed., MIT, You also might want to read several of the surveys in: R. Schmalensee and R. Willig, eds., Handbook of Industrial Organization, North-Holland, (HIO). Grading will be based on several problem sets and two exams. The first exam, covering theory will be held in the regular class time on Tuesday October 31. The second, covering the empirical part, will be a take-home exam handed out the afternoon of Friday, December 1 and due the morning of Monday, December 4. In the list that follows starred items are especially important. We will not discuss all of the papers on the reading list, however, we expect you to read all of the papers we discuss in detail in class. The following abbreviations are used for journal titles: AER American Economic Review JET Journal of Economic Theory BJE Bell Journal of Economics JIE Journal of Industrial Economics EMA Econometrica JLE Journal of Law and EJ Economic Journal JPE Journal of Political Economy IJIO International Journal of Industrial Organization QJE Quarterly Journal of Economics JE Journal of Econometrics RJE Rand Journal of Economics JEH Journal of Economic History ReStat Review of Economics and Statistics JEL Journal of Economic Literature ReStat Review of Economics and Statistics JEMS Journal of Economics & Management Strategy

2 450-1, Fall Page 2 I. Introduction * Scherer and Ross, Chaps. 1 and 3 * Tirole, Introduction Carlton and Perloff, pp. 2-6, Pryor, F., An International Comparison of Concentration Ratios, ReStat, May 1972, F. Fisher, Games Economists Play: A Noncooperative View, RJE, Spring 1989, R. Schmalensee, Industrial Organization: An Overview, EJ, September 1988, II. Theory A. Monopoly 1. Price Discrimination * Tirole, chap. 3 (including the appendix). Varian, H., Price Discrimination, Chapter 10 in HIO, Vol. I. Maskin, E. and J. Riley, Monopoly with Incomplete Information, RJE, Summer 1984, Deneckere, R. and P. McAfee, Damaged Goods, JEMS, Summer 1996, * Bolton P., and M. Dewatripont, Contract Theory, MIT Press, pp McAfee, P., J. McMillan, and M. Whinston, Multiproduct Monopoly, Commodity Bundling, and Correlation of Values, QJE, May 1989, Sibley, D.S. and P. Srinagesh, Multiproduct Nonlinear Pricing with Multiple Taste Characteristics, RJE, Winter 1997, Armstrong, M., Multiproduct Nonlinear Pricing, EMA, January 1996, Armstrong, M. Price Discrimination by a Multi-Product Firm, ReStud, 1999,

3 450-1, Fall Page 3 2. Durable Goods * Tirole, chap. 1, Section 1.5 (pp ) and the appendix (pp ) Bulow, J., Durable Goods Monopolists, JPE, April 1986, Gul, F., H. Sonnenschein, and R. Wilson. Foundations of Dynamic Monopoly and the Coase Conjecture, JET, 1986, Hendel, I. and A. Lizzeri, Interfering with Secondary Markets, RJE, Spring 1999, B. Oligopoly Price/Quantity Competition 1. Static Models * Tirole, chap. 5, Section 2.1 (pp ); Sections 7.1, 7.2, 7.5 (pp , ). Shapiro, C., Theories of Oligopoly Behavior, HIO, Vol. I, chap. 6. Waterson, M., Economic Theory of the Industry (Cambridge University Press, 1984), chap. 2. Mas-Colell, A., M. Whinston, and J. Green, Microeconomic Theory (Oxford University Press, 1995), Section 12.C. Vives, X., Oligopoly Pricing: Old Ideas and New Tools, Cambridge: MIT Press, The Cournot Model Amir, R. and V.E. Lambson, On the Effects of Entry in Cournot Markets, ReStud (67), April 2000, * Kreps, D. and J. Scheinkman, Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes, BJE, Autumn 1983,

4 450-1, Fall Page 4 Davidson, C. and R. Deneckere, Long-run Competition in Capacity, Short-run Competition in Price, and The Cournot Model, RJE, Autumn 1986, Klemperer, P. and M. Meyer, Supply Function Equilibria in Oligopoly Under Uncertainty, EMA, November 1989, Price Competition with Product Differentiation Salop, S. Monopolistic Competition with Outside Goods, BJE, Spring 1979, Shaked, A. and J. Sutton, Relaxing Price Competition through Product Differentiation, ReStud, January 1982, Dynamic Models * Tirole, Chapter 6. Mas-Colell, A., M. Whinston, and J. Green, Microeconomic Theory (Oxford University Press, 1995), Section 12.D. Abreu, D., Extremal Equilibria of Oligopolistic Supergames, JET, June 1986, Genosove, D. and W.P. Mullin, Rules, Communication and Collusion: Narrative Evidence from the Sugar Institute Case, AER, June 2001, Collusion with Observable Demand Variation * Rotemberg, J. and G. Saloner, A Supergame-Theoretic Model of Price Wars During Booms, AER, June 1986, Haltiwanger, J. and J. Harrington, The Impact of Cyclical Demand Movements on Collusive Behavior, RJE, Spring 1991, Bagwell, K. and R. Staiger, Collusion Over the Business Cycle, RJE, Spring 1997, Collusion with Capacity Constraints Brock, W. and J. Scheinkman, Price-Setting Supergames with Capacity Constraints, ReStud, July 1985,

5 450-1, Fall Page 5 * Compte, O., F. Jenny, and P. Rey, Capacity Constraints, Mergers, and Collusion, European Economic Review, 2002, Vasconcelos, H., Tacit Collusion, Cost Asymmetries, and Mergers, RJE, Spring 2005, Kuhn, K.-U., The Coordinated Effects of Mergers in Differentiated Products Market, Univ. of Michigan Olin Center Working Paper No. 34. Benoit, J.P. and V. Krishna, Dynamic Duopoly: Prices and Quantities, ReStud, January 1987, Multimarket Contact Bernheim, D. and M. Whinston, Multimarket Contact and Collusive Behavior, RJE, Spring 1990, Collusion with Unobservable Demand Variation (Imperfect Monitoring) Stigler, G., A Theory of Oligopoly, JPE, February 1964, * Green, E. and R. Porter, Non-cooperative Collusion Under Imperfect Price Information, EMA, January 1984, * Abreu, D., D. Pearce, and E. Stachetti, Optimal Cartel Equilibria with Imperfect Monitoring, JET, June 1986, Abreu, D., D. Pearce, and E. Stachetti, Toward a Theory of Discounted Repeated Games with Imperfect Monitoring, EMA, September 1990, Collusion with Private Types * McAfee, R.P. and J. McMillan, Bidding Rings, AER (82), 1992, * Athey, S., K. Bagwell, and C. Sanchirico, Collusion and Price Rigidity, ReStud, April 2004, Athey, S. and K. Bagwell, Optimal Collusion with Private Information, RJE (32), Autumn 2001, Staggered Price Setting

6 450-1, Fall Page 6 * Maskin, E. and J. Tirole, A Theory of Dynamic Oligopoly II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles, EMA, May 1988, Collusion and Antitrust Enforcement * Whinston, M.D. [2006], Lectures on Antitrust Economics, Chapters 1(*) and 2 (no *), Cambridge: MIT Press. (Preliminary versions are CSIO Working papers # s 39 and 40.) Baker, J., Private Enforcement and the Deterrent Effect of Antitrust Damage Remedies, Journal of Law, Economics, and Organization, Fall 1988, McCutcheon, B. [1997], Do Meetings in Smoke-Filled Rooms Facilitate Collusion?, JPE, 1997, Harrington, J.E. Jr., Cartel Pricing Dynamics in the Presence of an Antitrust Authority, RJE, 2004, Switching Costs * Beggs, A. and P. Klemperer, Multi-period Competition with Switching Costs, EMA, May 1992, Klemperer, P., Competition when Consumers have Switching Costs: An Overview with Application to Industrial Organization, Macroeconomics, and International Trade, ReStud, October 1995, Durable Goods Ausubel, L.M. and R.J. Deneckere, One is Almost Enough for Monopoly, RJE, 1987, * Gul, F., Noncooperative Collusion in Durable Goods Oligopoly, RJE, Carlton, D.W. and R.H. Gertner, Market Power and Mergers in Durable Goods Industries, JLE, 1989, Gerstle, A.D. and M. Waldman, Mergers in Durable-goods Industries: A Reexamination of market Power and Welfare Effects, 2004, mimeo. 3. Price Discrimination in Oligopoly Stole, L., Price Discrimination and Imperfect Competition, forthcoming in Handbook of

7 450-1, Fall Page 7 Industrial Organization, Vol Borenstein, S., Price Discrimination in Free Entry Markets, RJE, Autumn 1985, Holmes, T., The Effects of Third Degree Price Discrimination in Oligopoly, AER, March 1989, * Corts, K., Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment, RJE, Summer 1998, Armstrong, M. and J. Vickers [2006], Competitive Price Discrimination, RJE, Dana, J., Advance Purchase Discounts and Price Discrimination in Competitive Markets, JPE, April 1998, Spulber, D., Product Variety and Competitive Discounts, JET (48), 1989, Stole, L., Nonlinear Pricing and Oligopoly, JEMS (4), Winter 1995, Ellison, G., A Model of Add-on Pricing, QJE, May 2005, C. Behavioral IO Ellison, G., Bounded Rationality in Industrial Organization, mimeo, August Gabaix, X. and D. Laibson, Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets, mimeo. Della Vigna, S. and U. Malmendier, Contract Design and Self-Control: Theory and Evidence, QJE, Della Vigna, S. and U. Melmandier, Paying Not to Go to the Gym, AER, June 2006,

8 450-1, Fall Page 8 III. Empirical D. Ackerberg, L. Benkard, S. Berry and A. Pakes, Econometric Tools for analyzing Market Outcomes, forthcoming in Handbook of Econometrics, Volume 6. P. Reiss and F. Wolak, Structural Econometric Modeling: Rationales and Examples from Industrial Organization, forthcoming in Handbook of Econometrics, Volume 6. A. Production, Technology and Industry Structure D. Ackerberg, K. Caves and G. Frazer, Structural Estimation of Production Functions, mimeo. L. Benkard, Learning and Forgetting: The Dynamics of Aircraft Production, AER, September 2000, U. Doraszelski and J Jaumandreu, R&D and Productivity: The knowledge Capital Model Revisited, Harvard. * Z. Griliches and J. Mairesse, Production Functions: The Search for Identification, NBER Working Paper No.w5067. D. Greenstreet, Exploiting Sequential Learning to Estimate Establishment-Level Productivity Dynamics and Decision Rules, Michigan. J. Levinsohn and A. Petrin, Estimating Production Functions Using Intermediate Inputs to Control for Unobservables, ReStud, April 2003, * S. Olley and A. Pakes, The Dynamics of Productivity in the Telecommunications Industry, EMA, November 1996, J. Panzar, Technological Determinants of Firm and Industry Structure, HIO, Vol. 1, Chapter 1. F. Wolak, An Econometric Analysis of the Asymmetric Information, Regulator-Utility Interaction, Annales d Economie et de Statistique, 1994, B. Empirical Studies of Pricing 1. Static Models O. Ashenfelter and D. Sullivan, Nonparametric Tests of Market Structure: An Application to the Cigarette Industry, JIE, June 1987, J. Baker and T. Bresnahan, Estimating the Residual Demand Curve Facing a Single Firm, IJIO,

9 450-1, Fall Page 9 September 1988, S. Borenstein, J. Bushnell and F. Wolak, Measuring Market Inefficiencies in California s Restructured Wholesale Electricity Market, AER, December 2002, A * T. Bresnahan, The Oligopoly Solution is Identified, Economics Letters, 1980, 10, * T. Bresnahan, Empirical Studies of Industries with Market Power, HIO, Vol. 2, Chapter 17. K. Corts, Conduct Parameters and the Measurement of Market Power, JE, November 1998, D. Genesove and W. Mullin, Testing Static Oligopoly Models: Conduct and Cost in the Sugar Industry, , RJE, Summer 1998, C. Holt, Industrial Organization: A Survey of Laboratory Research, in J. Kagel and A. Roth (eds.), The Handbook of Experimental Economics, Princeton, 1995, J. Panzar and J. Rosse, Testing for 'Monopoly' Equilibrium, JIE, June 1987, M. Salinger, The Concentration-Margin Relationship Reconsidered, Brookings Papers on Economic Activity Micro, 1990, R. Schmalensee, Inter-industry Studies of Structure and Performance, HIO, Vol. 2, Chapter 16. C. Wolfram, Measuring Duopoly Power in the British Electricity Spot Market, AER September 1999, Repeated Interaction V. Aguirregabiria, The Dynamics of Markups and Inventories in Retail Firms, ReStud, April 1999, * S. Borenstein and A. Shepard, Dynamic Pricing in Retail Gasoline Markets, RJE, Autumn 1996, G. Ellison, Theories of Cartel Stability and the Joint Executive Committee, RJE, Spring 1994, * R. Porter, A Study of Cartel Stability: The Joint Executive Committee, , BJE, Autumn 1983, Evans, W. and I. Kessides, Living by the 'Golden Rule': Multimarket Contact in the U.S. Airline Industry, QJE, May 1994,

10 450-1, Fall Page 10 Phillips, O. and C. Mason, Mutual Forbearance in Experimental Conglomerate Markets, RJE, Autumn 1992, Differentiated Products Industries S. Anderson, A. depalma and J. Thisse. Discrete Choice Theory of Product Differentiation, 1992, Cambridge and London, MIT Press. * T. Bresnahan, Competition and Collusion in the American Automobile Market: The 1955 Price War, JIE, June 1982, F. Gasami, J. Laffont, and Q. Vuong, Econometric Analysis of Collusive Behavior in a Soft- Drink Market, JEMS, 1992, J. Baker and T. Bresnahan, Estimating the Residual Demand Curve Facing a Single Firm, International Journal of Industrial Organization, 1988, J. Hausman, G. Leonard, and J. Zona, Competitive Analysis with Differentiated Products, Annales D'Economie et de Statistique April/June 1994, D. McFadden, Econometric Analysis of Qualitative Response Models, in Griliches and Intilligator (eds.), Handbook of Econometrics, Volume III, 1984 Amsterdam: North-Holland. * S. Berry, 1994, "Estimating Discrete-Choice Models of Product Differentiation," RJE Summer 1994, * A. Nevo, Aviv, A Practitioner s Guide to Estimation of Random Coefficients Logit Models of Demand, JEMS, 2000, * S. Berry, J. Levinsohn, and A. Pakes, Automobile Prices in Market Equilibrium, EMA, July 1995, * A. Nevo, Measuring Market Power in the Ready-to-Eat Cereal Industry, EMA, March 2001, * P. Goldberg, "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," EMA, July 1995, I. Hendel, Estimating Multiple Discrete Choice Models: An Application to Computerization Returns, ReStud, 1999, 66(2), S. Berry, J. Levinsohn and A. Pakes, Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The new Car Market, JPE, 2004,

11 450-1, Fall Page 11 S. Berry, and A. Pakes, Estimating the Pure Hedonic Discrete Choice Model with Application to Price Indices, 2001, mimeo, Yale. 4. Welfare and Hedonic Prices Hedonic Price Regressions and Price Indices Z. Griliches, Hedonic Price Indexes for Automobiles: An Econometric Analysis of Quality Change, In The Price Statistics of the Federal Government (General Series No. 73). New York: National Bureau of Economic Research;, 1961, Reprinted in Griliches (ed.), Price Indices and Quality Change: Studies in New Methods of Measurement. Cambridge, Mass.: Harvard University Press, R. Feenstra, Exact Hedonic Price Indexes, ReStat, 1995 (4), A. Pakes, A Reconsideration of Hedonic Price Indices with an Application to PC's, AER, 2003, * S. Rosen, Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition, JPE Jan./Feb. 1974, D. Epple, Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products, JPE, January 1987, * P. Bajari, and L. Benkard, Demand Estimation With Heterogeneous Consumers and Unobserved Product Characteristics: A Hedonic Approach, JPE, December 2005, Welfare Measures Computed from Estimated Demand Systems * M. Trajtenberg, The Welfare Analysis of Product Innovations, with an Application to Computed Tomography Scanners, JPE 1999, T. Bresnahan, S. Stern and M. Trajtenberg, Market Segmentation and the Sources of Rents from Innovation, RJE, 1997, S17-S44. A. Petrin, Quantifying the Benefits of New Products: The Case of the Minivan, JPE, 2002, * J. Hausman, Valuation of New Goods Under Perfect and Imperfect Competition, in Bresnahan and Gordon (eds) The Economics of New Goods, Studies in Income and Wealth, 1996, Vol. 58, Chicago: NBER. Including comment by Bresnahan (in the same volume) and reply to comment (and reply to reply). J. Hausman, Cellular Telephone, New Products and the CPI, Journal of Business and Economic Statistics, 1999,

12 450-1, Fall Page 12 A. Nevo, New Products, Quality Changes and Welfare Measures Computed from Estimated Demand Systems, ReStat, 2003, 85(2), D. Ackerberg and M. Rysman., Unobservable Product Differentiation in Discrete Choice Models: Estimating Price Elasticities and Welfare Effects, RJE, Winter 2005, Price Discrimination E. Blackstone, Restrictive Practices in the Marketing of Electrofax Copying Machines: The SCM Corporation Case, JIE, March 1975, S. Borenstein, Selling Costs and Switching Costs: Explaining Retail Gasoline Markets, RJE, Autumn 1991, S. Borenstein and N. Rose, Competition and Price Dispersion in the U.S. Airline Industry, JPE, August 1994, A. Cohen, Package Size and Price Discrimination: Evidence from Paper Towels, mimeo, Virginia, P. Goldberg, Dealer Price Discrimination in New Car Purchases: Evidence from the Consumer Expenditure Survey, JPE, June 1996, P. Leslie, Price Discrimination in Broadway Theater, RJE, Autumn 2004, A. Nevo and C. Wolfram, Why Do Manufacturers Issue Coupons? An Empirical Analysis of Breakfast Cereals, RJE, 2002, 33(2), , * A. Shepard, Price Discrimination and Retail Configuration, JPE, February 1991, J Ivaldi, M. and D. Martimort, Competition under Nonlinear Pricing, Annales d Economie et de Statistique (34), 1994, McManus, Brian Nonlinear Pricing in an Oligopoly Market: the Case of Specialty Coffee. Washington University Olin School of Business. Mimeo. C. Dynamics 1. Single Agent D. Ackerberg, Advertising, Learning, and Consumer Choice in Experience Good Markets: An Empirical Examination, International Economic Review, 2003, 44 (3),

13 450-1, Fall Page 13 V. Aguirregabiria, The Dynamics of Markups and Inventories in Retailing Firms, The Review of Economic Studies, 1999, 66, V. Aguirregabiria and P. Mira, Swapping the Nested Fixed Point Algorithm: A Class of Estimators for Discrete Markov Decision Models, Econometrica, 2002, 70 (4), Z. Eckstein and K. Wolpin, The Specification and Estimation of Dynamic Stochastic Discrete Choice Models, Journal of Human Resources, 1989, 24, * I. Hendel, and A. Nevo, Measuring the Implications of Sales and Consumer Stockpiling, 2005, NBER WP J. Hotz, and B. Miller, Conditional Choice Probabilities and the Estimation of Dynamic Models, Review of Economic Studies, 1993, 60, J. Hotz, B. Miller, Sanders and Smith, A Simulation Estimator for Dynamic Models of Discrete Choice, Review of Economic Studies,1994, 61, * A. Pakes, Patents as Options: Some Estimates of the Value of Holding European Patent Stocks, Econometrica, 1986, 54(4), * J. Rust, Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher, Econometrica, 1987, 55(5), J. Rust, Structural Estimation of Markov Decision Processes, Handbook of Econometrics, 1996, Volume 4, Chapter 51. C. Timmins, Measuring the Dynamic Efficiency Costs of Regulators' Preferences: Municipal Water Utilities in the Arid West. Econometrica, 2002, 70(2), Multi-Agent Models V. Aguirregabiria and P. Mira, Sequential Estimation of Dynamic Discrete Games, Forthcoming Econometrica. P. Bajari, L.Benkard, and J. Levin, Estimating Dynamic Models of Imperfect Competition L. Benkard, A Dynamic Analysis of the Market for Wide-Bodied Commercial Aircraft Market, Review of Economics Studies, A. Collard-Wexler, Demand Fluctuations and Plant Turnover in Ready-Mix Concrete, 2005 NYU. U. Doraszalski and M. Satterthwaite, Foundations of Markov-Perfect Industry Dynamics:

14 450-1, Fall Page 14 Existence, Purification, and Multiplicity, 2005, Mimeo. Harvard University. R. Ericson and A. Pakes, Markov-Perfect Industry Dynamics: A Framework for Empirical Work, Review of Economic Studies, 1996, 62 (January): A. Pakes and P. McGuire, Computing Markov-perfect Nash Equilibria: Numerical Implications of a Dynamic Differentiated Product Model, Rand Journal of Economics, 1994, 25 (Winter): A. Pakes, A Framework for Applied Dynamic Analysis in I.O., 2000, NBER WP no A. Pakes, M. Obstrovsky and S Berry, Simple Estimators for the Parameters of Discrete Dynamic Games, 2004, Harvard. M. Pesendorfer and P. Schmit-Dengler, Asymptotic Least Squares Estimators for Dynamic Games, 2006, LSE. S. Ryan The Costs of Environmental Regulation in a Concentrated Industry, 2005, MIT.