Methodologies(5) Anti-trust laws and competition policy are concerned with the creation and maintenance of market power. The intent of competition policy is to prevent firms from creating enhancing or maintaining market power The new lo, with its focus on strategic competition and firm conduct to acquire and maintain market power, provides the intellectual foundation for determining when and why firm behavior and business practices warrant antitrust examination and prohibition
Methodologies (5) • Anti-trust laws and competition policy are concerned with the creation and maintenance of market power. The intent of competition policy is to prevent firms from creating, enhancing, or maintaining market power. The new IO, with its focus on strategic competition and firm conduct to acquire and maintain market power, provides the intellectual foundation for determining when and why firm behavior and business practices warrant antitrust examination and prohibition
Main issues in jo Perfect competition economics of market power (the defining characteristic of imperfect competitive markets), the welfare economics used to assess market performance The theory of the firm Different aspects of monopoly: its sources; its costs and benefits; pricing quality choice Theory of oligopoly pricing and the game theory. Strategic competition Anti-trust economics Regulatory economics
Main issues in IO • Perfect competition, economics of market power (the defining characteristic of imperfect competitive markets), the welfare economics used to assess market performance. • The theory of the firm. • Different aspects of monopoly: its sources; its costs and benefits; pricing; quality choice. • Theory of oligopoly pricing and the game theory. • Strategic competition. • Anti-trust economics. • Regulatory economics
Foundations (1) A review of perfect competition An introduction to the economics of market power-the defining characteristic of imperfectly competitive markets a discussion of the welfare economics used to assess market performance
Foundations（1） • A review of perfect competition • An introduction to the economics of market power-the defining characteristic of imperfectly competitive markets • A discussion of the welfare economics used to assess market performance
Foundations (2) The theory of the firm (1)a review of the traditional microeconomic conception of a firm where we review and highlight the relevance of a number of important cost concepts such as sunk expenditures, economies of scale, and economies of scope 2)an extended discussion of the economics of organization in the context of trying to explain the boundaries of a firm. If markets are such an efficient institution to organize transactions why are not all transactions organized by markets? Why do firms exist? Why do firms ever opt to make rather than buy and why is it never more efficient to always make rather than buy? What limits the size of firms? Can we identify a set of factors that are responsible for determining whether a transaction is organized within a firm or by markets and the assumed goal of firms is profit maximization However, when? thereby determine the extent of vertical integration? The limits to firm size are closely related to the objective of firms. In microeconor firms are controlled by professional managers and not shareholders this assumption may not be tenable We examine the validity of this assumption and the mechanisms both internal and external, that help align the incentives of owners and managers and in doing so romote profit maximization
Foundations（2） • The theory of the firm: • (1) a review of the traditional microeconomic conception of a firm where we review and highlight the relevance of a number of important cost concepts such as sunk expenditures, economies of scale, and economies of scope. • (2)an extended discussion of the economics of organization in the context of trying to explain the boundaries of a firm. If markets are such an efficient institution to organize transactions, why are not all transactions organized by markets? Why do firms exist? Why do firms ever opt to make rather than buy? And why is it never more efficient to always make rather than buy? What limits the size of firms? Can we identify a set of factors that are responsible for determining whether a transaction is organized within a firm or by markets and thereby determine the extent of vertical integration? The limits to firm size are closely related to the objective of firms. In microeconomics the assumed goal of firms is profit maximization. However, when firms are controlled by professional managers and not shareholders this assumption may not be tenable. We examine the validity of this assumption and the mechanisms, both internal and external, that help align the incentives of owners and managers and in doing so promote profit maximization
Monopoly (1) Different aspects of monopoly: its sources; its costs and benefits pricing and quality choice A discussion of the source of market power, highlighting the importance of entry barriers Also consider two factors which might limit the ability of a monopolist to exercise its market power: (1)the effect of product durability; (2 )the possibility of a competitive fringe An extended discussion of the costs and benefits of monopoly Analysis of how a monopolist might exploit her position by widening the scope of her behavior (1)the monopolist may not charge the same price per unit across all units and consumers-price discrimination occurs when different consumers pay different prices or the per unit price per customer varies across units. Explore the profit and welfare implications of price discrimination
Monopoly (1) • Different aspects of monopoly: its sources; its costs and benefits; pricing; and quality choice. • A discussion of the source of market power, highlighting the importance of entry barriers. • Also consider two factors which might limit the ability of a monopolist to exercise its market power: (1)the effect of product durability; (2)the possibility of a competitive fringe. • An extended discussion of the costs and benefits of monopoly. • Analysis of how a monopolist might exploit her position by widening the scope of her behavior: • (1)the monopolist may not charge the same price per unit across all units and consumers-price discrimination occurs when different consumers pay different prices or the per unit price per customer varies across units. Explore the profit and welfare implications of price discrimination