Industrial Organisation

Overview

This second-year undergraduate course has three parts, the first providing the theoretical grounding for the other two, which are more policy-orientated. The first half of the syllabus provides the basic theoretical underpinning of modern industrial organisation, and tries to answer the positive question: what is competition? It compares and contrasts different paradigms on the relationship between market structure and firm conduct, as well as different theories of the firm. It introduces classic models of imperfect competition, shows how they have been revised in light of new economic thinking, and demonstrates how welfare analysis can be used to understand their social implications. Special attention is given to models of product differentiation. The second part of the syllabus looks at why and how public policy influences industrial organisation, and tries to answer the normative question: how do we achieve competition? Starting with a look at the historical origins of antitrust law, the module sets out how competition policy is used today by looking at real competition cases. The last topic covers three controversial areas of public policy as it relates to firms and industries: priviatisation and natural monopoly, patents and innovation, and recent government bailouts of banks.

Learning Objectives

Knowledge and understanding: On completion of the course, students should have greater familiarity with theoretical and applied topics in industrial organisation. They should have developed further ability to interpret sources of information on industrial issues. The module is intended to complement the other intermediate modules which place more emphasis on microeconomic model building; accordingly this module will place emphasis on the application of theories and on the economic policymaking process as it relates to firms and industries.

Skills

Intellectual skills: Students should understand the major theoretical aspects of the theory of the firm as well as more modern conceptual and empirical developments. Topics such as imperfect competition, product differentiation, barriers to entry, innovation and incentives, and mergers and acquisitions are covered. Case studies, both contemporary and historical, are used. Students should develop an advanced understanding of the aims and objectives of public policy and how it relates to firms and industry. They should be familiar with the pros and cons of different points of view on controversial current issues and the practical difficulties and trade-offs emerging from their implementation. They should be able to use positive and normative perspectives to weigh evidence and draw conclusions based on argument and empirical analysis.

Practical skills: Students will develop their oral and written communication skills and will get an awareness of how economic analysis can be applied to firms and industries.

Assessment

Students must achieve an overall mark of 40% in the module to pass