This course is concerned with the strategic decisions taken by firms in markets, in particular when they have market power. First, we will try to understand what market power is and how firms behave in markets. To do so, the course will introduce the classical models of imperfect competition in markets. In the second part, we will investigate cartels, tacit collusion, and its consequences on welfare and anti-trust policies. One important aspect of anti-trust policy is mergers. Mergers between direct competitors are known as horizontal mergers. We try to understand if and when such mergers are profitable and welfare-enhancing. In the third part, we will investigate how a firm can be a natural monopolist, without fearing entry, and how incumbent firms may behave strategically to make entry for new firms harder, or even unprofitable. In the fourth part of the lecture, we analyse firms with vertical supply chains. Could upstream firms deny competitors access to distribution and supply channels? Lastly, we study applications of behavioral economics on industrial organization and regulatory issues. Here, we discuss potential regulations to protect customers if customers suffer from behavioral biases.
The course will be split in lectures as well as exercises in order to rehearse and practice the course content.
The course is suitable for economics and business students with an interest in strategy, market power, and regulation of markets. The course requires sound knowledge of microeconomics at the undergraduate level.