30458 - STRATEGIC DECISION MAKING AND MARKETS
Course taught in English
Go to class group/s: 13
Class-group lessons delivered on campus
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 characterized by a limited number of firms that behave strategically. Antitrust intervention plays an increasing role in those markets and shapes the competitive environment. This course examines the performance and operation of imperfectly competitive markets, as well as the behavior 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. This is an Engage Course within the CIVICA Bachelor Engage Track developed within the framework of the CIVICA alliance.
- 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, tying 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 and of tying.
- 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.
- Understand and discuss real-world anti-trust cases.
- Face-to-face lectures
- Online lectures
- Guest speaker's talks (in class or in distance)
- Exercises (exercises, database, software etc.)
- Case studies /Incidents (traditional, online)
- Individual assignments
The learning experience of this course includes, in addition to face-to-face and online 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. 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.
The assessment will be based on a written exam (75% of the final grade) and on exercises assigned during the course (25% of the final grade). The written exam consists of exercises and short questions. Students can take: (i) two-partial written exams (the exam is passed if in both written partial exams the grade is above 18/30); (ii) a general written exam. The final grade is given by the weighted average of the grade obtained in the assignments and the grade obtained in the written exam (either the two partial exams, or the general).
The exercises included in the written exam and in the individual assignments allow the instructor to assess whether students master equilibrium concepts and the models of strategic product market behavior, and whether they can identify the appropriate tools to solve static and dynamic games of oligopolistic competition. The short questions allow the instructor to assess whether students can use the concepts illustrated during the lectures so as to understand and interpret real-world situations, such as anti-trust cases and policy measures, and to perform a market profitability analysis.
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.