30458 - STRATEGIC DECISION MAKING AND MARKETS
Course taught in English
Go to class group/s: 13
Students attending this course should be familiar with basic microeconomics concepts, in particular with the notion of Nash Equilibrium and Subgame Perfect Nash Equilibrium, with basic oligopolistic models (such as Bertrand and Cournot models of static competition) and with the fundamentals of unconstrained and constrained optimization problems.
Markets that populate our economies are characterised by a limited number of firms that behave strategically. Antitrust intervention plays an increasing role in those markets, by shaping the competitive environment. This course examines the performance and operation of imperfectly competitive markets, as well as the behaviour of firms in these markets. The course looks at the effects of various business decisions and of various forms of policy intervention on the way firms compete and on the outcome of oligopolistic markets.
- Game Theory.
- The determinants of market power in static oligopolistic models.
- Strategic positioning and advertising.
- Consumer inertia: search costs and switching costs.
- The intensity of rivalry in dynamic oligopolistic models: collusive agreements.
- Horizontal mergers.
- Strategic and non-strategic barriers to entry.
- Markets with network externalities.
- Exclusive dealing and other exclusionary practices.
- Anti-trust intervention in oligopolistic markets.
- Describe the main equilibrium concepts that allow to find the outcome of situations characterized by strategic interaction.
- Explain the economic models on strategic interaction of firms in oligopolistic markets and describe their main insights regarding the determinants of market power and of market structure.
- Describe the development of competition in markets characterized by network externalities and other forms of consumer inertia (i.e. search costs and swicthing costs).
- Discuss the unilateral and coordinated effects of horizontal mergers.
- Discuss the potential exclusionary effect of exclusive dealing contracts.
- Discuss the role of anti-trust intervention in oligopolistic markets and the principles of competition policy.
- Choose and apply the appropriate tools to solve static and dynamic games of oligopolistic competition.
- Perform an industry profitability analysis based on the intensity of rivalry and the threat of entry.
- Choose and apply the appropriate model to assess the effect of various business practices and of various forms of policy intervention on the intensity of competition.
- Evaluate the strategic effects and the welfare effects of a merger episode.
- Interact in a constructive way and think critically.
- Analyze how the effects of a change in government policies or other shocks propagate across different markets.
- Face-to-face lectures
- Guest speaker's talks (in class or in distance)
- Exercises (exercises, database, software etc.)
- Case studies /Incidents (traditional, online)
The learning experience of this course includes, in addition to face-to-face lectures, the solution in class of Problem Sets assigned to students throughout the course. Those exercises allow students to apply the analytical tools illustrated during the course and to solve models of oligopolistic competition as well as simple general equilibrium models. Moreover stylized cases are proposed to students and discussed in class with the purpose of applying the models explained during the course to make the competitive assessment of a given market, to evaluate the effects of a given business practice or the implications of a given policy action. Students are encouraged to bring their own views and to share their insights.
|Continuous assessment||Partial exams||General exam|
With the purpose of measuring the acquisition of the above-mentioned learning outcomes, the students’ assessment is based on two main components:
- Written exam. The written exam consists of exercises and open questions aimed to assessing students’ ability to apply the analytical tools illustrated during the course to solve and explain models of oligopolistic competition. The exam also consists of short statements to discuss. Those statements are aimed to assessing students’ ability to articulate economic reasoning and to evaluate the potential effects of a given business practice or policy action. Students can take a partial written exam and complete the written exam at the end of the course. In this case the weight is: 50% for the partial exam and 50% for the end of term exam. Alternatively, students can take a final written exam that accounts for 100% of the final grade of the written exam.
- In-class participation aimed to testing the students’ ability to interact in a constructive way and to think critically. Class participation adds from 0 to 2 points to the final grade of the written exam.
Students’ assessment is based on the written exam (either two partial exams or one final written exam with the same content and weight distribution of those applied to attending students).
The main course material, for both attending and non-attending students, is:
- P. BELLEFLAMME, M. PEITZ, Industrial Organization, Cambridge University Press, last edition.
- The slides of the course, Problem Sets and additional readings are uploaded to the Bboard platform of the course.