This course covers research methods in applied industrial organization. The primary focus will be on the use of econometric analysis and data both for descriptive and measurement purposes, and to test the predictions of economic theories. The course will also focus on empirical methods used in competition policy. Papers that demonstrate the various methods will be discussed in detail with an emphasis on data, sources of identification, and estimation techniques. Applied papers will be a larger part of this discussion.

The course begins with a brief review of the core models in industrial organization: firm theory, monopoly and oligopoly. An overview of the role of empirics in industrial organization will also be presented.

The course proceeds first by focusing on technology, production functions, and cost functions. Methods to estimate production functions and cost functions will be developed. These methods will then be applied to investigate important issues concerning industry productivity, returns to scale and others.

The next main topic will be demand estimation. Demand functions are an important primitive that influence the various decisions firms make. In theoretical models, demand functions are often assumed to exist and take a specified form. But, where do demand functions come from? Empirical methods of estimating demand functions will be discussed.

The next main topic will focus on competition in homogenous-product industries. Topics include:

1) Empirically testing for market power;

2) Empirical models of collusion;

3) Dynamic Pricing;

4) Price fixing;

5) Investigating the market effects of horizontal mergers.

The next topic will focus on competition in differentiated- product industries. Once again, topics include:

1) Measuring market power in markets with differentiated products;

2) Competition and collusion in markets with differentiated products;

3) Measuring the effects of horizontal mergers.

The final topic looks at advertising. Investigate the effect of advertising on prices and consumer demand.

The course´s development of personal competences:

During the course, students will develop the skills necessary to analyze industry and market data. In particular, the students will learn how to interpret industry data in conjunction with the theoretical models discussed during lecture. Upon the completion of the course, students will be able to undertake sophisticated research projects in industrial organization and competition policy.

Textbooks:

Wooldridge, Jeffery, Econometric Analysis of Cross Section and Panel Data, Cambridge, MA: The MIT Press, 2002.

Pepall, Lynne, Dan Richards and George Norman, Industrial Organization: Contemporary Theory and Empirical Applications, Oxford: Blackwell Publishing, 2008.

Papers:

Griliches, Z. and J. Mairesse (1995): "Production Functions: The Search for Identification", NBER Working Paper no. 5067, http://papers.nber.org/papers/w5067.

Olley, G. and A. Pakes (1996) “The Dynamics of Productivity in the Telecommunications Equipment Industry,” Econometrica, 64, 1263-1297

C. Syverson, (2004) “Market Structure and Productivity: A Concrete Example,” JPE 112(6), pp. 1181-1222.

Borenstein, S., Bushnell, J., and Wolak, F. (2002) “Measuring Market Inefficiencies in California’s Wholesale Electricity Industry.” American Economic Review, 92(5), pp. 1376-1405.

Berry (1994) “Estimating Discrete Choice Models of Product Differentiation,” Rand Journal of Economics, 242-262

Petrin, A. (2002), “Quantifying the Benefits of New Products: The Case of the Minivan”, Journal of Political Economy, 110, pp. 705–729.

D. Genesove and W. Mullin, (1998) “Testing Static Oligopoly Models: Conduct and Cost in the Sugar Industry, 1890-1914,” RJE 29(2), Summer, pp. 355-377.

Porter, R. (1983) “A Study of Cartel Stability: The Joint Executive Committee, 1880-1886.” Bell Journal of Economics, 14, pp. 301-14.

Slade, Margaret (2004): Market Power and Joint Dominance in U.K. Brewing, Journal of Industrial Economics, 70, 133–163.

Borenstein, S. and A. Shepard (1996) “Dynamic pricing in Retail Gasoline Markets,” Rand Journal of Economics, 27, 429-451

Berry, S., Levinsohn, J, and Pakes, A. (1995) “Automobile Price in Market Equilibrium.” Econometrica, 63, pp. 841-90.

Nevo, A. (2000) “A Practitioner’s Guide to Estimation of Random Coefficient Logit Models of Demand.” Journal of Economics and Management Strategy, 9, pp. 513-48.

Nevo, Aviv (2000), Mergers With Differentiated Products: The Case of the Ready-to-eat Cereal Industry,” RAND Journal of Economics, 31, 2000, 395-421.

Nevo (2001) “Measuring Market Power in the Ready-to-Eat breakfast Cereal Industry,” Econometrica, 69, 307-342

D. Ackerberg, (2002) “Empirically Distinguishing Informative and Prestige Effects of Advertising,” RJE 32(2), pp. 100-118.

J. Milyo and J. Waldfogel, (1999) “The Effect of Price Advertising on Prices: Evidence in the Wake of 44 Liquormart,” AER 89(5), pp. 1081-96.