Industrial Organization MPhil Microeconomics

Transcription

1 Industrial Organization MPhil Microeconomics Pablo Casas-Arce and Paul Klemperer Michaelmas 2006 DRAFT Required Text Tirole, J The Theory of Industrial Organization. MIT Press. 1 Theory of the Firm Required Readings Markets versus hierarchies, transaction costs, incomplete contracts, property rights. Objectives of the rm, the separation of ownership and control, managerial incentives, the takeover mechanism. Hart, O Firms, Contracts and Financial Structure. Clarendon Press. (Especially chapters 1 and 2.) Gibbons, R Four Formal(izable) Theories of the Firm? mimeo. Moore, J "The Firm as a Collection of Assets." European Economic Review (Not required if you nd Hart straightforward.) either Tirole (1988), pages 15-51, or Holmstrom, B. R. and J. Tirole "The Theory of the Firm." In Handbook of Industrial Organization. Schmalensee and Willig, eds. North Holland. (Especially sections 2 and 4). Holmstrom, B. R. and J. Roberts "The boundaries of the rm revisited." Journal of Economic Perspectives 12(4): Grossman, S., and O. Hart "Takeover bids, the Free rider Problem, and the Theory of the Corporation." Bell Journal Holmstrom, B. R "Managerial Incentive Problems: A Dynamic Perspective." Review of Economic Studies (originally written in 1982). Jensen, M., and W. Meckling "The theory of the rm: Managerial behaviour, agency costs and ownership structure." Journal of Financial Economics

2 2 Oligopoly Theory (a). Cournot and Bertrand Tirole (1988), pages (b). Cooperation in repeated games Tirole (1988), pages , (c). Product di erentiation Tirole (1988), pages , (d). Price competition vs quantity competition Shapiro, C "Theories of Oligopoly Behavior." In Handbook of Industrial Organization. Schmalensee and Willig, eds. North Holland. (Especially pages ) 3 Entry and Strategic Behavior (a). Entry and welfare, wars of attrition, entry barriers, contestability Tirole (1988), pages Armstrong, M., S. Cowan, and J. Vickers Regulatory Reform: Economic Analysis and the British Experience. MIT Press, Cambridge and London. (Pages ) Baumol, W "Contestable Markets: An Uprising in the Theory of Industry Structure." American Economic Review (b). Strategic investment and entry deterrence and accommodation Tirole (1988), pages , Bulow, J. I., J. D. Geanakoplos, and P. D. Klemperer "Multimarket oligopoly: Strategic substitutes and complements." Journal of Political Economy 93(3): Dixit, A. K "The role of investment in entry-deterrence." Economic Journal 90: Shapiro, C "Theories of Oligopoly Behavior." In Handbook of Industrial Organization. Schmalensee and Willig, eds. North Holland. (Especially pages ) 2

3 (c). Limit pricing, predatory pricing Tirole (1988), pages Milgrom, P., and J. Roberts "Limit pricing and entry under incomplete information: An equilibrium analysis." Econometrica 50(2): Extra topic: IO and Auctions Klemperer, P Auctions: Theory and Practice. Princeton University Press. (Chapter 3.) 1 Theory of the Firm Optional Additional Readings Alchian, A., and H. Demsetz "Production, information and economic organization." American Economic Review 62: Baker, G., and T. Hubbard Make Versus Buy in Trucking: Asset Ownership, Job Design, and Information. American Economic Review 93: Baker, G., and T. Hubbard Contractibility and Asset Ownership: On- Board Computers and Governance in U.S. Trucking. Quarterly Journal of Economics 119(4): Grossman, S., and O. Hart The Costs and Bene ts of Ownership: A Theory of Vertical and Lateral Ownership. Journal of Political Economy 94: Hart, O., and J. Moore Property Rights and the Nature of the Firm. Journal of Political Economy 98: Holmstrom, B. R "The Firm as a Subeconomy." Journal of Law, Economics, and Organization 15: Holmstrom, B. R., and P. R. Milgrom "The rm as an incentive system." American Economic Review 84: Joskow, P Vertical Integration and Long-Term Contracts: The Case of Coal-Burning Electric Generation Plants. Journal of Law, Economics, and Organization 1: Joskow, P Contract Duration and Relationship-Speci c Investment: Empirical Evidence from Coal Markets. American Economics Review 77:

4 Williamson, O. E "Transaction-cost economics: The governance of contractual relations." Journal of Law and Economics 22(2): Oligopoly Theory (a). Cournot and Bertrand Shapiro, C "Theories of Oligopoly Behavior." In Handbook of Industrial Organization. Schmalensee and Willig, eds. North Holland. (Especially ) (b). Cooperation in repeated games Farrell, J. and P. D. Klemperer. "Coordination and Lock-In: Competition with Switching Costs and Network E ects." In Handbook of Industrial Organisation, Vol. 3. M. Armstrong and R. Porter (eds.). North Holland, forthcoming (draft available at Green, E. J., and R. H. Porter "Noncooperative collusion under imperfect price information." Econometrica 52(1): Klemperer, P. D "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade." Review of Economic Studies 62(4): Kreps, D. M., P. Milgrom, J. Roberts, and R. Wilson. "Rational Cooperation in the Finitely Repeated Prisoners Dilemma." Journal of Economic Theory. 27(2): Rotemberg, J. J., and G. A. Saloner "Supergame-theoretic model of price wars during booms." American Economic Review 76(3): Shapiro, C "Theories of Oligopoly Behavior." In Handbook of Industrial Organization. Schmalensee and Willig, eds. North Holland. (Especially pages ) Stigler, G. J "A theory of oligopoly." Journal of Political Economy 72: (c). Product di erentiation Dixit, A. K., and J. E. Stiglitz "Monopolistic competition and optimum product diversity." American Economic Review 67(3): Salop, S. C "Monopolistic competition with outside goods." Bell Journal of Economics 10(1):

5 Schmalensee, R "Entry deterrence in the ready-to-eat breakfast cereal industry." Bell Journal of Economics 9(2): Shaked, A., and Sutton, J "Relaxing price competition through product di erentiation." Review of Economic Studies 49(1): (d). Price competition vs quantity competition Klemperer, P. D., and M. A. Meyer "Price Competition vs. Quantity Competition: The Role of Uncertainty." Rand Journal of Economics 17(4): (Reprinted in Cournot Oligopoly: Characterization and Applications, A. Daughety Ed. Cambridge University Press, (1988), ) Klemperer, P. D., and M. A. Meyer "Supply Function Equilibria in Oligopoly under Uncertainty." Econometrica 57(6): Kreps, D. M., and J. A. Scheinkman "Quantity precommitment and bertrand competition yield cournot outcomes." Bell Journal of Economics 14(2): Shapiro, C "Theories of Oligopoly Behavior." In Handbook of Industrial Organization. Schmalensee and Willig, eds. North Holland. (Especially ) 3 Entry and Strategic Behavior (a). Entry and welfare, wars of attrition, entry barriers, contestability Bulow, J. I., and P. D. Klemperer "The Generalized War of Attrition." American Economic Review 89(1): Gilbert, R "Mobility Barriers and the Value of Incumbency." In Handbook of Industrial Organization. Schmalensee and Willig, eds. North Holland. (Especially pages ) Mankiw, G., and M. Whinston "Free Entry and Social Ine ciency." Rand Journal of Economics (b). Strategic investment and entry deterrence and accommodation Bulow, J. I., J. D. Geanakoplos, and P. D. Klemperer "Holding idle capacity to deter entry." Economic Journal 95: Fudenberg, D., and J. Tirole "The fat-cat e ect, the puppy-dog ploy and the lean and hungry look." American Economic Review 74(2):

6 (c). Limit pricing, predatory pricing Tirole (1988), pages , and Ex (pages 440 and 456). 4 Extra topic: IO and Auctions Klemperer, P Auctions: Theory and Practice. Princeton University Press. (Chapters 2 and 5.) 1 Theory of the Firm Other References Aghion, P., and P. Bolton An Incomplete Contracts Approach to Financial Contracting. Review of Economic Studies 59: Aghion, P., and J. Tirole Formal and Real Authority in Organizations. Journal of Political Economy 105: Antras, P "Firms, Contracts, and Trade Structure." Quarterly Journal of Economics 118(4): Bolton, P., and M. Dewatripont "The rm as a communication network." Quarterly Journal of Economics 109(4): Bolton, P., and D. S. Scharfstein "Corporate nance, the theory of the rm, and organizations." Journal of Economic Perspectives 12(4): Boycko, M., A. Shleifer, and R. Vishny Privatizing Russia. MIT Press: Cambridge, MA. Caballero, R. J., and M. L. Hammour "The Macroeconomics of Speci city." Journal of Political Economy 106(4): Coase, R "The nature of the rm." Economica. 4: Cramton, P., R. Gibbons, and P. D. Klemperer. "Dissolving a Partnership E - ciently." Econometrica, Gibbons, R "Incentives in organizations." Journal of Economic Perspectives 12(4): Grossman, G. M., and E. Helpman "Integration versus Outsourcing in Industry Equilibrium." Quarterly Journal of Economics 117:

7 Hart, O., and J. Moore "A Theory of Debt Based on the Inalienability of Human Capital." Quarterly Journal of Economics 109: Hart, O., A. Shleifer, and R. W. Vishny "The Proper Scope of Government: Theory and an Application to Prisons" Quarterly Journal of Economics 112(4): Kreps, D. M "Corporate culture and economic theory." In Firms, Organizations and Contracts, P. J. Buckley and J. Michie, Eds. Oxford University Press. Kiyotaki, N., and J. Moore "Credit Cycles." Journal of Political Economy 105(2): Maskin, E. S. and J. Tirole "Two Remarks on the Property-Rights Literature." Review of Economic Studies (And also other articles in this issue of Review of Economic Studies.) Meyer, M., P. R. Milgrom, and J. Roberts "Organizational Prospects, In uence Costs, and Ownership Changes." Journal of Economics and Management Strategy Myerson, R. and M. Satterthwaite "E cient mechanisms for bilateral trading." Journal of Economic Theory 28: Rajan, R., and L. Zingales Power in the Theory of the Firm. Quarterly Journal of Economics 113: Stole, L. A., and J. Zwiebel "Organizational design and technology choice under intra rm bargaining." American Economic Review 86(1): Tirole, J "Incomplete Contracts: Where Do We Stand." Econometrica Whinston, M. D "On the Transaction Cost Determinants of Vertical Integration." Journal of Law, Economics, and Organization 19(1). Williamson, O. E Markets and Hierarchies: Analysis and Antitrust Implications. Free Press, New York. Williamson, O. E The Economic Institutions of Capitalism. Free Press, New York. 2 Oligopoly Theory (a). Cournot and Bertrand Amir, R "Cournot Oligopoly and the Theory of Supermodular Games." Games and Economic Behavior 15(2):

8 Spulber, D. F "Bertrand Competition When Rivals Costs are Unknown." Journal of Industrial Economics 43(1): (b). Cooperation in repeated games Abreu, D., D. Pearce, and E. Stacchetti "Optimal cartel monitoring with imperfect information." Journal of Economic Theory 39(1): Athey, S., and K. Bagwell "Optimal Collusion with Private Information." Rand Journal of Economics 32(3): Bernheim, D. B., and M. D. Whinston "Multimarket contact and collusive behavior." Rand Journal of Economics 21(1): Edgeworth, F. Y. The pure theory of monopoly. In Papers Relating to Political Economy, F. Y. Edgeworth, Ed. Macmillan, 1925, London, Ellison, G "Theories of cartel stability and the joint executive committee." Rand Journal of Economics 25(1): Farrell, J "Renegotiation in repeated oligopoly interaction." In Incentives, Organisation and Public Economics: Essays in Honour of Sir James Mirrlees, G. Myles and P. Hammond, eds. Oxford University Press. Fudenberg, D., and J. Tirole Game Theory. MIT Press, Cambridge, MA. (Pages ) (c). Product di erentiation D Aspremont, C., J. J. Gabszewicz, and J.-F. Thisse "On Hotelling s "stability in competition"." Econometrica 47(5): Farrell, J., and P. D. Klemperer. "Co-ordination and Lock-in: Competition with Switching Costs and Network E ects." In Handbook of Industrial Organization, vol. 3. Forthcoming, North Holland. Hotelling, H "Stability in competition." Economic Journal 39: Klemperer, P.D "How Broad should the Scope of Patent Protection Be?" Rand Journal of Economics 21(1): Lancaster, K. (1990) The Economics of Product Variety: A Survey, Marketing Science, 9(3):

9 (d). Price competition vs quantity competition Amir, R. and J. Y. Jin. (2001) Cournot and Bertrand Equilibria Compared: Substitutability, Complementarity and Concavity, International Journal of Industrial Organization, 19: Cheng, L "Comparing Bertrand and Cournot Equilibria: A Geometric Approach." Rand Journal of Economics 16(1): Klemperer, P., and M. Meyer "Consistent Conjectures Equilibria: A Reformulation Showing Non-Uniqueness." Economics Letters 27(2): Singh, N. and X. Vives "Price and Quantity Competition in a Di erentiated Duopoly". Rand Journal of Economics 15(4): Weitzman, M. L "Prices vs. Quantities." Review of Economic Studies 41(4): Entry and Strategic Behavior (a). Entry and welfare, wars of attrition, entry barriers, contestability Aghion, P., and P. Bolton "Contracts as a Barrier to Entry." American Economic Review 77(3): Amir, R., and V. E. Lambson "On the E ects of Entry in Cournot Markets." Review of Economic Studies 67(2): Cabral, L "Simultaneous Entry and Welfare." European Economic Review 48(5): (b). Strategic investment and entry deterrence and accommodation Waldman, M "The role of multiple potential entrants / sequential entry in noncooperative entry deterrence." Rand Journal of Economics 22(3): Dixit, A "Comparative Statics for Oligopoly." International Economic Review 27(1): (c). Limit pricing, predatory pricing Benoit, J "Financially constrained entry in a game with incomplete information." Rand Journal of Economics 15(4): Bolton, P., and D. Scharfstein "A Theory of Predation Based on Agency Problems in Financial Contracting." American Economic Review 80(1):

10 Kreps, D. M., and R. Wilson "Reputation and imperfect information." Journal of Economic Theory 27(2): (And also Milgrom, P., and J. Roberts in the same issue.) 4 Extra Topic Klemperer, P Auctions: Theory and Practice. Princeton University Press. (Chapters 1, 4, 6-8.) (All the Klemperer papers can be found at