Industrial Organization (saylor.org)

This course surveys major topics and theories in the field of Industrial Organization. As part of the applied microeconomics structure, Industrial Organization uses the basic tools of microeconomic theory and game theory to study the structure and behavior of firms and their strategic interactions with one another in the marketplace. Industrial Organization also studies the impact that those interactions have on market structure and welfare.

Different kinds of market structures (perfect competition, imperfect competition, monopoly, oligopoly, and so forth) present different scenarios in which firms strive to acquire and use market power for their strategic advantage. While perfect competition and monopoly are two market structures on opposite ends of the spectrum, imperfect competition—where a limited number of firms attempt to manipulate their rivals or consumers—is a more realistic set-up. This course will emphasize market structure analysis and the strategic behaviors of competing firms, including (but not limited to) product differentiation, collusion, price discrimination, pricing strategy, non-price discrimination (i.e. advertising), horizontal mergers, vertical integration, and vertical restraints.

Industrial Organization also examines the public policies that affect the structure of markets and the behavior of firms. The government’s role as a regulator, working to prevent monopolization and restraint of trade, has been a constant topic of study in and of itself. Although this course will introduce Antitrust Laws in the above context, it will not delve into the regulatory implications or the welfare analyses of firms’ strategic behaviors, as those subjects belong to more advanced Industrial Organization modules. By the end of this course, you will be able to understand, analyze, and evaluate the basic theoretical models that define the behavior of firms and industrial organization more generally. You will also learn the game theory approach to some of these models. While emphasizing theory, the lessons in this course will include empirical studies that will provide you with a deeper understanding of the topic. This should enable you to apply the theory you have learned to real world examples.

This course requires you to have completed the Principles of Microeconomics course and Calculus I. You should also have a basic understanding of game theory prior to enrolling in this course.

Upon successful completion of this course, students will be able to:

Identify different theories of the firm.

Describe the different market structures under which firms operate, with particular emphasis on concentration and monopoly power as well as oligopoly.

Analyze how market structures impact the behavior of firms.

Identify and compare the anti-competitive pricing strategies that firms adopt under various market structures.

Use the theoretical insights presented in this course to explain observed features of particular markets and industries.

Apply a deepened knowledge of game theory to understand the strategic behavior of firms in the market.

Determine the factors that influence the firm’s decision-making over time.

Critically analyze the role of the government in regulating industries and the subsequent implications of public regulation.