EC930 Theory of Industrial Organisation

EC930 Theory of Industrial Organisation

Your term paper should have a maximum length of 4,000 words

1. The economics of internet markets The digital economy has exploded in the last twenty years. It has lowered the cost of creating and distributing certain types of products and services as well as the cost of acquiring information about these goods and the cost of collecting and using data on consumer tastes and behaviour. What are the main features of online markets and how have they affected firms’ competitive strategies and traditional retail markets? Two good surveys of the economics of the internet address these and several other issues: ‘Lessons about Markets from the Internet’ by G. Ellison and S.F. Ellison, published in the Journal of Economic Perspectives (2005); and ‘The Economics of Internet Markets’ by J. Levin, NBER Working Paper no. 16852 (2011). A useful recent book is the Handbook on the Economics of the Internet, edited by J.M. Bauer and M. Latzer (Edward Elgar, 2016). And you can search the internet for more!

2. The effects of cartels: theory and evidence Do cartels matter and how? Assess the theory and empirical evidence on their impact on prices and profits as well as on non-price variables such as innovation, investment, productivity and market structure. What are the implications of this evidence for the welfare effects of cartels and for competition policy? A good starting point for the empirical literature is the survey by M.C. Levenstein and V.Y. Suslow, ‘What Determines Cartel Success?’, Journal of Economic Literature (2006). Check also theoretical models of collusion and ‘semi-collusion’, and look for evidence from antitrust cases and econometric studies of cartels, including G. Symeonidis, ‘The Effect of Competition on Wages and Productivity: Evidence from the UK’, Review of Economics and Statistics (2008); Y.V. Bolotova, ’Cartel overcharges: An empirical analysis’, Journal of Economic Behavior & Organization (2008); and H. Kang, How Does Competition Affect Innovation? Evidence from US Antitrust Cases (working paper

3. Predation: theory and evidence Some economists believe that predation can never be a rational strategy for firms, going as far as calling it a ‘myth’ or a ‘unicorn’. Furthermore, among those who disagree with this view, many might nevertheless admit that predation is probably rare in practice. Review briefly the theoretical literature and assess the arguments for and against predation as a rational strategy for firms. Then illustrate with reference to at least two case studies the alleged use of predatory tactics by firms and any relevant policy responses by antitrust authorities.