Course Details

1. Identify alternative approaches to the analysis of competition.
2. Define industry and discuss its main determinants
3. Critically assess firm’s motivation and rationality
4. Analyze determinants of market structure
5. Examine models of oligopoly pricing and assess their efficiency.
6. Discuss basic principles of antimonopoly legislation.

Introduction to Industrial Economics:

Relating microeconomic analysis to the theory of industrial economics. Alternative approaches to the analysis of competition. Definition of industry and its main determinants. Structure-conduct – performance approach to the analysis of competition. The constraints of the SCP paradigm.

The theory of the firm. Firm’s motivation and rationality. Transaction costs and their dimensions.

Market Structure and Concentration: 

Determinants of market structure. M. Porter’s five forces model of competitive structure. Main determinants of concentration. Alternative measures of market concentration. Concentration and profitability. Long run trends in concentration. Different techniques to measuring long run costs. Scale economies and economies of scope. Analysis of merger behaviour.

Market Structure and Product Differentiation:

Definition. Sources of differentiation. Horizontal vs. vertical differentiation. Market segments, strategic groups and product proliferation. The need for consumer protection.

Market Structure and Barriers to Entry: 

Definition of barriers to entry. Structural (innocent) vs. strategic barriers to entry. The impact of barriers to entry on market structure.

Pricing practices of big firms:

Models of noncooperative pricing and assessment of its stability.  Conditions for cooperation. Tacit and intacit behavior. Cartel pricing and its constraints. Conduct of the dominant firm and price leadership. Cost plus pricing model and its implications.

Price discrimination: conditions and stimuli; types of price discrimination. Simulation of methods of price discrimination. The impact of price discrimination on firm’s profitability and on welfare.

Performance of the big business:

Profitability, allocative efficiency, and efficiency in distribution. Market power and X-inefficiency.  Critical evaluation of  the views on social responsibility of business. The need for antimonopoly legislation. Main principles and dimensions of antitrust. Basics of the antimonopoly legislation of the EU.

• Andreosso B. and Jacobson D. Industrial Economics & Organization. A European Perspective. McGraw Hill, 2005
• Heather K. The Economics of Industries and Firms. Prentice Hall, 2002,

• Church J. and R. Ware. Industrial Organization. A Strategic Approach. McGraw Hill, 2000
• Carlton D. and J. M. Perloff. Modern industrial Organization. Addison Wesley, 2004.
• Cabral L. Introduction to Industrial Organization. MIT Press, 2004.

Ex cathedra lectures and discussions in class, by means of traditional tools or using computer demonstrations. Some of the key issues are revealed on the basis of simulation games.

Topic notes are compiled by students, during the lecture which serve to cover the main issues under consideration and can also be downloaded from the lecturer’s webpage. Further literature search is encouraged by assigning students to identify a specific problem related to some issue, gather relevant scientific information about how others have addressed the problem and report this information in written or orally.

Students’ teams (of two or three individuals) are assigned to study structural dimensions and conduct of firms in a chosen industry in Cyprus and present their case studies in class.