Brandeis University Prof. Kathryn Graddy
January 2014
Office hours: T, F 10:00-11:00
Telephone: 781-736-8616
Industrial Organization
Tuesday and Friday, 11:00 – 12:20
Overview
Industrial organization is the branch of microeconomics that investigates how firm and industry structure influences market behavior and market outcomes. The course material includes the theory of firm behavior under alternative market structures, empirical evidence on firm and industry behavior, and implications for public policy. Economists specializing in the field of industrial organization are in demand as consultants to business and government.
Economics 80a and Economics 83a(or equivalent courses in microeconomic theory and statistics) should be completed before enrolling in Economics 135a.
Learning Goals:
1)To understand firm behavior under alternative market structures.
2)To be able to analyze empirical evidence on firm behavior.
3)To understand the implications of firm behavior and market structure for both firm strategy and public policy questions.
Course Requirements:
Homework Assignments (15% of grade) – I will assign 6 homework sets over the course of the semester, of which 5 will be required. My policy regarding cooperative work on these homework sets is discussed on the next page; please read it carefully. Assignments will be due in class (due dates are given in the syllabus). No late assignments will be accepted. Homeworks will be marked with a “check +” (good effort), “a check” (moderate effort), or a “check –“ (very little effort). A “check +” is worth 100, a “check” is worth 80 and a “check –“ is worth 60 points.
Problem SetAssignment due dates: 1/31, 2/14, 3/18, 3/25, 4/8, 4/14
Reading Assignments (5% of grade) – I will assign 7 reading assignments over the course of the semester, of which 5 will be required. These must be submitted on latte by the time and date indicated or else a zero will be assigned for the assignments. These assignments must be submitted on latte. You may check your answers with one another, but you MAY NOT use the same wording or copy one another.
Reading Assignment due dates: 1/24, 2/4, 2/25, 3/11, 3/18, 3/25, 4/8
Class participation (5% of grade) – Students are allowed 2 free absences. Each additional absence will result in a grade decrease of 1%, up to 5% of the grade. No electronic devices, including computers, can be used in the classroom, and students will be considered absent if found using a device.
Class Paper: (20% of grade) A 10-page paper (on a subject of the students' choice) is due during the finals period. The paper ideally should be done with a partner.
Midterm (20%) which will be held in class.
Final exam (35%) to be held during the final exam period.
Please note that there will be NO make-up exams given. Absence from an exam will be excused only for a serious illness or bereavement (which must be documented). A student who is unable to take the final exam for a legitimate reason MUST obtain advance authorization from the Office of Undergraduate Academic Affairs.
Special Accommodations: If you are a student with a documented disability on record at Brandeis University and wish to have a reasonable accommodation made for you in this class, please see me immediately.
Academic Honesty: You are expected to be familiar with and to follow the University’s policies on academic integrity ( Instances of alleged dishonesty will be forwarded to the Office of Campus Life for possible referral to the Student Judiciary System. Sanctions may include failure in the course and suspension from Brandeis. If you have any questions about expectations, please ask.
Policy on Homework Sets Reading Questions and Exams:
1.Homework sets are designed to help you learn how to apply the material presented in lectures. You are permitted and indeed encouraged to discuss course material, including homework, with other students in the class. However, you are expected to turn in your own individual solutions for each homework set. Discussion with others is intended to clarify ideas, concepts, and technical questions, not to derive group homework set solutions. Identical homework set answers (especially when the steps used to derive answers are not shown or when questions of interpretation are involved) violate this policy and may receive no credit or occasion disciplinary action. In order to help with grading, please list on your problem set the members of a group (if any) with whom you have worked.
2.Handwritten solutions are fine, so long as they are legible and neat. Please remember: if we can’t read it, we can’t grade it.
3.In fairness to students who complete assignments on time, late homework sets will not be accepted. You must turn in assignments during the lecture on the day they are due or earlier in the day to my mailbox.
4.During exams, you may consult the proctor administering the exam if you need clarification of exam questions. No discussion or other form of communication with anyone else will be permitted after the exams have been handed out, until all students have turned in their exam books. Students found to have cheated or engaged in any other unethical behavior will be given a grade of F on the examination involved, and will be turned over to the appropriate disciplinary committees within Brandeis University for further action.
READING ASSIGNMENTS
The basic text is Modern Industrial Organization by Dennis W. Carlton and Jeffrey M. Perloff (4th edition, 2005), with supplements on the web at Other assigned readings go deeper into some topics or provide an alternative or updated perspective.
Assigned readings will be available on the course website.
Because issues evolve rapidly, readings selected in advance cannot cover the latest developments. Students are encouraged to follow current issues by reading periodicals such as The Wall Street Journal,The Financial Times, The New York Times, or The Economist on a regular basis. All are available at Brandeis and local public libraries, and all offer student subscriptions at substantially reduced rates.
COURSE OUTLINE AND READING LIST.
Introduction: (1 lecture) – 1/14
Introduction and overview
Topic 1: (4 lectures) – 1/17, 1/21, 1/24, 1/28
Cost concepts, Perfect competition, monopoly/monopsony, and dominant firm with fringe model
Carlton and Perloff, Chapter 2 (starting on page 20 with Mergers and Acquisitions) chapters 3 and 4
Reading:
The Horizontal Merger Guidelines, Department of Justice, pages 1-19: Due 1/24 before class
HOMEWORK #1 DUE – 1/31
Topic 2 (4 lectures):1/31, 2/4, 2/7, 2/11
Oligopoly and Cartels
Carlton and Perloff, Chapter 6 (first) and then chapter 5
“A Cartel at Work.” On the U.S. Department of Justice website (
Ashenfelter, Orley and Kathryn Graddy, “Anatomy of the Rise and Fall of a Price-Fixing Conspiracy: Auctions at Sotheby’s and Christie’s”, Journal of Competition Law and Economics 2005, 1: 3-20. Reading due 2/4 to be submitted on latte before class.
HOMEWORK #2 DUE – 2/14
Topic 3 (2 lectures): 2/14, 2/25
Monopolistic competition
Carlton and Perloff, Chapter 7.
Schmalensee, R. 1978. Entry deterrence in the ready-to-eat breakfast cereal industry. Bell Journal of Economics. 9: 305-327. Accessible through JSTOR (
Reading Assignment 3 due 2/25 before class.
PRACTICE MIDTERM WITH ANSWERS HANDED OUTON 2/14
Midterm in Class2/28
Speaker from Antitrust Consulting Group 3/4
Topic 4 (2 lectures) 3/7, 3/11
Price Discrimination and Alternative Pricing Schemes
Carlton and Perloff chapter 9 and 10
Graddy, K. 1995. Testing for Imperfect Competition at the Fulton Fish Market. Rand Journal of Economics. 26, 75-92.
HOMEWORK #3 DUE 3/18
Topic 5 (2 lectures) 3/14, 3/18
Entry Deterrence
Carlton and Perlof chapter 11
(Dupont paper reading, due 3/18)
HOMEWORK #4 DUE 3/25
Topic 6 (2 lectures) 3/21, 3/25
Auctions
Orley Ashenfelter “How Auctions work for Wine and Art” Journal of Economic Perspectives, 1989. Accessible through JSTOR (
Topic 7 (2 lecture) 3/28, 4/1
Vertical Integration
Carlton and Perloff, chapter 12
HOMEWORK #5 DUE 4/8
Topic 8 (2 lecture) 4/4 and 4/8
Information, advertising and disclosure
Carlton and Perloff, Chapters 13 and 14.
George A. Akerlof, “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,” Quarterly Journal of Economics, August 1970. Accessible through JSTOR (
John Kwoka, “Advertising and the Price and Quality of Optometric Services” American Economic Review, March 1984. Accessible through JSTOR (
Paper topic (one paragraph) due on 4/8
Homework #6 Due on 4/25
Topic 9, 1 lecture, 4/11
Patents and Technological Change
Carlton and Perloff, Chapter 16
4/22, 4/25, and 4/29
Presentations of paper proposals
Guidelines for papers and past topics are posted on latte.
Final paper due by midnight on Tuesday, 4/29. The paper must be uploaded to latte.
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