Contemporary Industrial Organization: A Quantitative Approach

Preface.

PART I MICROECONOMIC FOUNDATIONS.

1 Industrial Organization and Imperfect Competition: What, How, and Why?

1.1 What Is Industrial Organization?

1.2 How We Analyze Imperfect Competition.

1.3 Why: Antitrust Policy and Industrial Organization Theory.

Summary.

Problems.

References.

Appendix–Excerpts from Key Antitrust Statutes.

2 Basic Microeconomics.

2.1 Competition versus Monopoly: The Poles of Market Performance.

2.2 Intertemporal Considerations and Constraints on Monopoly Power.

Summary.

Problems.

References.

3 Technology and Cost Relationships.

3.1 Production Technology and Cost Function for Single-Product Firms.

3.2 Cost Relations for Multiproduct Firms.

3.3 Non-Cost Determinants of Market Structure.

3.4 Empirical Application: Cost Function Estimation, Scale and Scope Economies.

Summary.

Problems.

References.

4 Market Structure and Market Power.

4.1 Measuring Market Structure.

4.2 Measuring Market power—the Lerner Index Again.

4.3 Empirical Application: Monopoly Power: How Bad Is It?

Summary.

Problems.

References.

PART II PRICE AND NONPRICE TACTICS FOR FIRMS WITH MARKET POWER.

5 Price Discrimination and Monopoly.

5.1 The Feasibility of Price Discrimination.

5.2 First-Degree Price Discrimination.

5.3 Price Discrimination with Less Information.

5.4 Second-Degree Price Discrimination: Menu Pricing.

Summary.

Problems.

References.

6 Price Discrimination, Product Variety, Bundling & Tying.

6.1 Price Discrimination and Product Quality.

6.2 Price Discrimination and Product Variety.

6.3 Bundling and Tying.

6.4 Empirical Application: Price Discrimination, Product Variety, and Monopoly versus Competition.

Summary.

Problems.

References.

PART III OLIGOPOLY AND STRATEGIC INTERACTION.

7 Static Games and Quantity versus Price Competition.

7.1 A Brief Introduction to Game Theory.

7.2 Dominant and Dominated Strategies.

7.3 The Static Cournot Model.

7.4 The Bertrand Model.

7.5 Strategic Substitutes and Complements.

7.6 Empirical Application: Brand Competition and Consumer Preferences—Evidence from the California Retail Gasoline Market.

Summary.

Problems.

References.

8 Dynamic Games and First and Second Movers.

8.1 The Stackelberg Model of Quantity Competition.

8.2 Sequential Price Competition

8.3 Sequential Quality Choice.

8.4 Commitment and Credibility in Dynamic Games.

8.5 The Chain-Store Paradox.

Summary.

Problems.

References.

9 Entry Deterrence and Predation.

9.1 Market Structure over Time; Random Process & Stylized Facts.

9.2 Deterring Entry.

9.3 Predation and Asymmetric Information.

9.4 Long-Term Contracts as a Barrier to Entry.

9.5 Predatory Conduct and Public Policy.

9.6 Empirical Application: Entry Deterrence in the Pharmaceutical Industry.

Summary.

Problems.

References.

10 Price Fixing and Repeated Games.

10.1 The Cartel's Dilemma.

10.2 Repeated Games.

10.3 Empirical Application 1: Estimating the Effects of Price-Fixing.

10.4 Cartels in Practice: Facilitating Factors and Practices.

10.5 Antitrust Policy toward Cartels; Deterrence and Detection.

10.6 Empirical Application: An Experimental Investigation of Leniency Programs.

Summary.

Problems.

References.

PART IV CONTRACTUAL RELATIONSHIPS BETWEEN FIRMS.

11 Horizontal Mergers.

11.1 Horizontal Mergers and the Merger Paradox.

11.2 Mergers and Cost Synergies.

11.3 Merged Firms as Stackelberg Leaders.

11.4 Sequential Mergers.

11.5 Horizontal Mergers and Product Differentiation.

11.6 Public Policy and Horizontal Mergers.

11.7 Application: Evaluating the Impact of Mergers with Computer Simulation.

Summary.

Problems.

References.

12 Vertical and Conglomerate Mergers.

12.1 Procompetitive Vertical Mergers.

12.2 Vertical Mergers, Price Discrimination, and Competition.

12.3 Vertical Mergers, Oligopoly, and Foreclosure.

12.4 A Reappraisal: The GE-Honeywell Merger Once More.

12.5 A Note on Conglomerate Mergers.

12.6 Empirical Application: Vertical Integration in the Ready-Mixed Concrete Industry.

Summary.

Problems.

References.

13 Vertical Restraints.

13.1 Vertical Price Restraints and Antitrust Policy: A Brief History.

13.2 Vertical Price Restraints and Suppressed Competition.

13.3 Arguments in Support of Vertical Price Restraints.

13.4 Retail Price Maintenance and Uncertain Demand.

13.5 Nonprice Vertical Restraints.

13.6 Aftermarkets.

13.7 Empirical Application: Exclusive Dealing in the U.S. Beer Industry.

Summary.

Problems.

References.

PART V TOPICS IN NONPRICE COMPETITION: ADVERTISING AND RESEARCH AND DEVELOPMENT.

14 Advertising, Market Power, and Information.

14.1 Advertising and Monopoly Power: The Dorfman-Steiner Condition.

14.2 Advertising as Consumer Information.

14.3 Advertising, Information, and Competition.

14.4 Complements, Advertising, and Brand Names.

14.5 Empirical Application: Advertising, Information, and Prestige.

Summary.

Problems.

References.

15 Research and Development.

15.1 A Taxonomy of Innovations.

15.2 Market Structure and the Incentive to Innovate.

15.3 A More Complete Model of Competition and Innovation.

15.4 Evidence on the Schumpeterian Hypothesis.

15.5 Product and Process Innovation: Cournot versus Bertrand.

15.6 R&D Cooperation between Firms.

15.7 Empirical Application: R&D Spillovers in Practice.

Summary.

Problems.

References.

16 Patents and Patent Policy.

16.1 Optimal Patent Length.

16.2 Optimal Patent Breadth.

16.3 Patent Races.

16.4 Monopoly Power and “Sleeping Patents.”

16.5 Patent Licensing.

16.6 Recent Patent Policy Developments.

16.7 Empirical Application: Patent Law and Patent Practice in the Semiconductor Industry.

Summary.

Problems.

References.

PART VI SPECIAL TOPICS: NETWORKS AND STRATEGIC TRADE POLICY.

17 Network Markets.

17.1 Market Provision of a Network Service.

17.2 Networks, Competition, and Complementary Services.

17.3 Systems Competition and the Battle over Industry Standards.

17.4 Application: Network Externalities in Computer Software—Spreadsheets.

Summary.

Problems.

References.

18 Strategic Commitments: Confronting Potential Entrants and International Rivalry.

18.1 The Strategic Value of Commitment.

18.2 Strategic Complements and Substitutes: Cats, Dogs, and the Lean and Hungry Look.

18.3 Strategic Commitments in International Markets.

18.4 Trade Agreements and Commitment Devices.

Summary.

Problems.

References.

Answers to Selected Problems.

Index.