Student guide Faculty of Economics A.Y. 2008/09

Industrial Economics
Aim of the course
The aim of the Industrial Economics course is to equip students with the critical tools needed to examine competition on the market, the factors which determine the industrial structure, and the strategic choices of firms. In the first part, the organisation of firms, and their vertical and horizontal boundaries, are examined according to modern  theory of the firm approaches. The second part is devoted to studying the competitive choices of firms and the sector structure which results from them.
1. Industrial economics. The fundamental problems : the Structure-Conduct-Performance approach and Porter's Five Forces framework.
2. Horizontal boundaries of the firm.
3. Vertical boundaries of the firm: examples of “hold-up”.
4. Analysis of competition: forms of markets. Monopoly, perfect competition, oligopoly, and market power.
5. Overcoming Bertrand's paradox:
    I) Capacity constraints
    II) Dynamic competition and collusion
    III) Product differentiation
6. Advertising.

7. Market power and concentration.
8. Entry and exit: structure of the market, cost of entry and deterrence strategies.
9. Deterrence to entry and proliferation of products: the case of breakfast cereals.

10. Mergers and acquisition and antitrust policy: the Heineken-Birra Moretti case.

11. Innovation and R&D (research & development).
12. Industrial dynamics: the case of the automotive sector.

There will be a written examination at the end of the course.
Students can choose between the following two examination methods.
Examination method 1 consists of open-ended questions to be discussed (evaluating whether the proposed statements are True, False, or Uncertain, and explaining under what circumstances).
Examination Method 2 consists of open-ended questions to be discussed, and an exercise to solve. The course in fact includes 4 tutorial sessions, in addition to the lectures. Students who choose to attend the tutorials and work out the exercise during the examination will be entitled to study an abridged reading list compared to those who choose examination method 1.
Reading list
The required reading materials (for the specified parts of the course) are:
- Cabral L. (2002), Economia Industriale, Carocci editore
- Besanko D., Dranove D., Shanley M., (2001), Economia dell’industria e strategie d’impresa, Utet, Torino
- For Examination Method 2 the following are additionally recommended: Garavaglia C. (2006), Economia Industriale: Esercizi e Applicazioni, Carocci editore
- Lecture notes
- Materials and slides supplied by the lecturers (NOTE: The lecture slides and materials distributed by the lecturers during the course are an integral part of the programme and will be covered in the examination. The slides can be downloaded from the course website) Additional texts and reading materials for further study will be assigned during the lectures.