ECO 329 Industrial Organization Dr. Selcen Öztürk

Personal info Name of Tutor: Dr. Selcen Öztürk BSc: Gazi, University, Department of Economics MSc: Hacettepe University, Department of Economics PhD: University of Sheffield, UK, Department of Economics Section information: Office Hours:

Course Outline Introduction:What is industrial organization and what does this lecture offer? Firms, consumers and the market Game theory Static imperfect competition: Bertrand and Cournot competition Dynamic imperfect competition: Stackelberg Product differentiation and advertisement Pricing strategies and market segmentation Cartels and tacit collusion Horizontal mergers Strategic incumbents and entry Vertically related markets R&D

Text Belleflamme P.; M. Peitz. Industrial Organization: Markets and Strategies. Cambridge, Cambrigde University Press, Pepall, L.; D. J. Richards and G. Norman. Industrial Organization: Contemporary Theory & Practice, 3rd edition. Mason, OH: South-Western, Church, J. and R. Ware. Industrial Organization: A Strategic Approach. New York, NY: McGraw- Hill, 2000.

About this course The aim of this course is to introduce you to the field of industrial organization. This course will use microeconomic and mathematical tools. Attendance is not necessary. There will be assignments. 2 midterms and a final exam (never multiple choice exams).

What is a market? Markets allow buyers and sellers to exchange goods and services in return for a monetary payment. Think about the assumptions of the perfect competition. Do we often face perfectly competitive markets?

Market Power Market power is essentially related to pricing. In perfectly competitive markets even a slight change in prices yields to a loss of all or most of the market share. How is it possible?

Market Power Market power is not a static concept. Firms enjoy market power because other firms do not find it worthwhile to offer identical or similar products or services. This can also be situated by entry deterrence.

Market Power and Monopoly Natural monopoly and oligopoly Government sponsored monopoly and oligopoly

Strategies In industrial organization we see firms as strategic players. The game they are playing can be static or dynamic. Depending on the assumptions and the definition of the game firms response to each others strategies. Firms’ strategies and responses yield to the equilibrium.

Next Week Firms consumers and the market: Chapter 2