20629 - EMPIRICAL INDUSTRIAL ORGANIZATION AND MARKET DESIGN
Course taught in English
Go to class group/s: 31
This is a topics course in the methodologies used to analyze data in Industrial Organization and Market Design. It blends together three tightly connected ingredients: (i) Industrial Organization - the field of microeconomics studying the functioning of imperfectly competitive markets. (ii) Market Design - the use of microeconomics tools to design marketplaces to fix market failures. (iii) Empirical microeconomics (or "micro econometrics") - the analysis of individual-level data on the economic behavior of individuals or firms using reduced-form (i.e., regression) methods or structural (i.e., model-based) methods applied to cross-section or panel data, often "big data." The course covers two major areas of IO: auctions and demand estimation. Regarding auction models, the course covers three main types of markets: single unit auctions (like art auctions or contract procurement), multiunit auctions (like treasury bills or electricity auctions) and online auctions (like online ad auctions in Google AdWords or eBay auctions). Regarding demand estimation, the course focuses on how to use price and quantity data to estimate consumer's utility and firms' costs and how to employ these estimates to analyze market power, collusion, mergers and acquisitions and the introduction of new products.
Part I: Auctions:
- Review of Game Theory and Basics of Auction Theory.
- Estimation Methods for Auction and Procurement Data.
- Applications: Single Unit Auctions.
- Applications: Multiunit Auctions.
- Apllications: Internet Auctions.
Part II: Demand Estimation:
- Introduction to Demand Estimation & Demand in Product Space.
- Demand in Characteristics Space: Basics Discrete Choice Models.
- Demand in Characteristics Space: Advanced Models.
- Demand Estimation: Supply Side, IV Choice and Computational Issues.
- Applications to Antitrust: Market Power and Collusion.
- Applications to Competition Policy: Market Power, Collusion and M&A.
- Applications to Industrial Policy: Subsidies and the Introduction of New Goods.
- Identify the areas of the economy where the tools of empirical industrial organization and market design can be applied.
- Describe the perspective through which the IO approach looks at markets.
- Recognize the appropriate tools for analyzing data and use them to estimate relevant features of the data.
- Read, explain and reproduce the quantitative analyses conducted in important cases in antitrust and competition policy.
- Distinguish the different auction and procurement systems throughout the economy and define their characteristics and implications.
- Use the tools learnt in class to analyze the functioning of imperfectly competitive markets.
- Read and interpret the evidence produced by others (both academic papers and studies by private consulting firms or public bodies) concerning these markets and to directly examine the data and compute/estimate the quantities needed to evaluate/assess the functioning of these markets.
- Master the tools of data analysis that have become an essential part of the economists' work in both the private sector (consulting firms and data-driven, such as Amazon, Google or Microsoft) and the public sector (competition authorities and central banks).
- Face-to-face lectures
- Guest speaker's talks (in class or in distance)
- Exercises (exercises, database, software etc.)
- Individual assignments
- Group assignments
- Guest speaker's talks (in class or in distance): a guest speaker discusses how in his company/institutions the economists working there use the tools discussed in class to conduct their activity.
- Exercises (Exercises, database, software etc.): exercises aimed at refining the students' understanding of the empirical methods discussed in class is given out for both parts of the class.
- Assignments: both individual and group assignments are given out during the course of the class to apply the empirical mathods presented in class.
|Continuous assessment||Partial exams||General exam|
The assessment methods for this class is based on:
- Exam 30%
- Problem Sets 30%
- Empirical project 40%
The empirical project entails replicating (part of) the analysis of one paper on auction and of one paper on demand estimation, among those discussed in class.
The class is based on the instructor's note and on a few academic papers that are detailed in the course syllabus. The following four books are not required but they all contain useful material from which the instructor's notes draw:
- A. ROTH, Who Gets What ― and Why: The New Economics of Matchmaking and Market Design, Eamon Dolan/Mariner Books, Reprint edition, June 7, 2016.
- K. TRAIN, Discrete Choice Methods with Simulation, Cambridge University Press, June 30, 2009, 2 edition.
- J. ANGRIST, J.S. PISCHKE, Mastering 'Metrics: The Path from Cause to Effect, Princeton University Press; with French flaps edition (December 21, 2014).
- H.J. PAARSCH, H. HONG, An Introduction to the Structural Econometrics of Auction Data, The MIT Press, January 6, 2006, 5-6-4-5-8th edition.