Table of Contents

Textbooks
1. PRICING
a)Durable Goods
b) Price Dispersion
c)Bundling
d) Auctions
2.OLIGOPOLY PRICE AND OUTPUT
a)Static competition
b)Repeated interactions and cartels
3.EMPIRICAL STUDIES OF STRUCTURE, PRICING AND PROFITABILITY
a)Interindustry Studies
b) Industry-specific studies
4.PRICE DISCRIMINATION
5.THEORY OF THE FIRM
a) Theories of the Firm
b) Tests of asset specificity
6. DYNAMICS OF MARKET STRUCTURE
a)Strategic Models of Entry...
b)Exit and turnover
c)Predation
d)Empirical analyses of entry
e) Intraindustry growth
7.INNOVATION AND R&D
a)Strategic models
b)Empirical studies of R&D and technology diffusion
c)Standardization and networks
8.PRODUCT SELECTION
a)Product differentiation and monopolistic competition
b)Product differentiation and strategic behavior
9.ADVERTISING AND PRICE DISPERSION
a)Theories of Advertising
b)Advertising empirics
10. AUCTIONS
a) Basics
b) Variations on optimal auctions
c) Correlated Signals
d) Affiliation
e) Econometrics of Auctions

Text:

Tirole, Jean, The Theory of Industrial Organization, Cambridge: MIT Press, 1988.

Related Reading:

For a simpler introduction:

Carlton, D. and Perloff, Modern Industrial Organization, Glenview IL: Scott Foresman, 1989.

For empirical information and case law:

Posner, R., and F. Easterbrook, Antitrust: Cases, Economic Notes and Other Materials, Second Edition, St. Paul, MN: West, 1981.

Scherer, F.M., and D. Ross Industrial Market Structure and Economic Performance, Third Edition, Boston: Houghton Mifflin, 1990.

General Reference:

Schmalensee, R. and R. D. Willig (eds): Handbook of Industrial Organization, Amsterdam: North-Holland, 1989.


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Articles

1. PRICING

Tirole, Chapter 1, p. 65-69.

G. Becker, "A Note on Restaurant Pricing and Other Examples of Social Influences on Price," Journal of Political Economy, 99:1109-1116, October 1991.

G. Becker and K. Murphy, "More on the Serial Determinants of Prices and Qualities," March 1993.

E. Maskin and J. Riley, "Monopoly with Incomplete Information," Rand Journal of Economics, 15 (Summer 1984), 171-196.

M. Mussa and S. Rosen, "Monopoly and Product Quality," Journal of Economic Theory, 18 (August 1978), 301-317.

1a)Durable Goods

Tirole, 72-3, 79-87.

Pesendorfer, W. "Design Innovation and Fashion Cycles," American Economic Review, forthcoming, 1994.

Bulow, "Durable Goods Monopolists," Journal of Political Economy, 15:314-332 (1982).

R. Coase, "Durability and Monopoly" Journal of Law and Economics, 15:143-149, 1972.

L. Ausubel and R. Deneckere, "Reputation in Bargaining and Durable Goods Monopoly," Econometrica, 57 (May 1989), S203-S232.


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1b) Price Dispersion

H. Varian, "A Model of Sales," American Economic Review, 70, 651-659 (1980).

G. Butters, "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies 44, 465-91 (1980).

P. Diamond, "A Model of Price Adjustment, Journal of Economic Theory, 3: 156-168 (1971).

P. McAfee, "Cartels and Merger in an Equilibrium Price Dispersion," Journal of Economic Theory, 1994.

S. Salop and J. Stiglitz, "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, 44 (April 1977), 493-510.

S. Salop and J.E. Stiglitz, "The Theory of Sales: A Simple Model of Equilibrium Price Dispersion with Identical Agents," American Economic Review, 72 (December 1982), 1121-30.

J. Stiglitz, "Competition and the Number of Firms in a Market: Are Duopolies More Competitive than Atomistic Markets?" Journal of Political Economy, 95: 1041-1061, (1987).<p A. Wolinsky, "True Monopolistic Competition as a Result of Imperfect Information," Quarterly Journal of Economics, 101: 493-511, 1986.

L. Ausubel, "The Failure of Competition in the Credit Card Market," American Economic Review, 81 (March 1991), 50-81.

B. Dahlby and D. West, "Price Dispersion in an Automobile Insurance Market," Journal of Political Economy, 94 (April 1986), 418-438.

1c)Bundling

P. McAfee, J. McMillan, and M. Whinston, "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," Quarterly Journal of Economics, 104 (May 1989), 371-383.

W.A. Adams and J.L. Yellin, "Commodity Bundling and the Burden of Monopoly, Quarterly Journal of Economics, 90 (August 1976) 475-98.


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1d) Auctions

J. Bulow and P. Klemperer, " ", American Economic Review, forthcoming.

P. McAfee and J. McMillan, "Auctions and Bidding," Journal of Economic Literature, 25 (June 1987), 699-738.

P. Milgrom and R. Weber, " A Theory of Auctions and Competitive Bidding," Econometrica, 50 (November 1982), 1089-1122.

P. Milgrom, "Auctions: A Primer," Journal of Economic Perspectives, 3 (Summer 1989), 3-22.

R. Porter, "The Role of Information in U.S. Offshore Oil and Gas Lease Auctions," mimeo, Northwestern, 1993.

R. Porter and D. Zona, "Detection of Bid-rigging in Procurement Auctions," Journal of Political Economy, 101 (June 1993), 518-538.


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2.OLIGOPOLY PRICE AND OUTPUT

How are price and output determined in an oligopoly for fixed capital stocks and a fixed number of firms?

Tirole, pp. 205-208 and Chapter 11.

Tirole, Chapter 5 and 6.

S&R, Chapters 6-8.

C. Shapiro, "Theories of Oligopoly Behavior," in HIO.

2a)Static competition

G. Maggi, "Strategic Trade Policies under Uncertainty about the Mode of Oligopolistic Competition," pp. 1-13, American Economic Review, forthcoming.

D. Kreps and J. Scheinkman, "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, 14 (Autumn 1983), 326-337.

2b)Repeated interactions and cartels

G. Stigler, "A Theory of Oligopoly," Journal of Political Economy, 72 (February 1964), 44- 61.

S&R, Chapter 9.

S. Salop, "Practices that (Credibly) Facilitate Oligopoly Coordination," in J. Stiglitz and F. Mathewson (eds.), New Developments in the Analysis of Market Structure, MIT, 1986, 265-290.

B. Bernheim and M. Whinston, "Multimarket Contact and Collusive Behavior," Rand Journal of Economics, 21 (Spring 1990), 1-26.

W. Evans and I. Kessides, "Living by the 'Golden Rule:' Multimarket Contact in the U.S. Airline Industry," mimeo, University of Maryland, 1991.

T. Cooper, "Most-Favored Customer Pricing and Tacit Collusion," Rand Journal of Economics, 17 (Autumn 1986), 377-389.

R. Gertner, "The Role of Firm Asymmetries for Tacit Collusion in Markets with Immediate Competitive Responses," April 1993.

D. Kreps, "Repeated Play: Cooperation and Reputation," Chapter 14 of A Course in Microeconomic Theory, Princeton, 1990.

E. Maskin and J. Tirole, "A Theory of Dynamic Oligopoly, I: Overview and Quantity Competition with Large Fixed Costs," Econometrica, 56, 549-570.

E. Maskin and J. Tirole, "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves and Edgeworth Cycles," Econometrica 56, 571-600.<p R. Grether and C. Plott, "The Effects of Market Practices in Oligopolistic Markets: An Experimental Examination of the Ethyl Case," Economic Inquiry, 22 (October 1984), 479-507.

E. Green and R. Porter, "Noncooperative Collusion Under Imperfect Price Information," Econometrica, 52 (January 1984), 87-100.

J. Rotemberg and G. Saloner, "A Supergame-Theoretic Model of Business Cycles and Price Wars During Booms," American Economic Review, 76 (June 1986), 390-407.

J. Haltiwanger and J. Harrington, "The Impact of Cyclical Demand Movements on Collusive Behavior," Rand Journal of Economics, 22 (Spring 1991), 89-106.

R. Porter, "A Study of Cartel Stability: The Joint Economic Committee, 1880-1886," Bell Journal of Economics, 14 (Autumn 1983), 301-314.

G. Ellison, "Theories of Cartel Stability and the Joint Executive Committee," RAND Journal of Economics, 25 (Spring 1994) 37-57.

S. Borenstein and A. Shepard, "Dynamic Pricing in Retail Gasoline Markets," NBER Working Paper 4489, October 1993.

J. Caves and S. Salant, "Cartel Quotas Under Majority Rule," forthcoming AER.

J. Baker, "Identifying Cartel Policing Under Uncertainty," Journal of Law and Economics, 32 (October 1989), 547-576.

R. Staiger and F. Wolak, "Collusive Pricing with Capacity Constraints in the Presence of Demand Uncertainty," Rand Journal of Economics, 23 (Summer 1992), 203-220.


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3.EMPIRICAL STUDIES OF STRUCTURE, PRICING AND PROFITABILITY.

What do inter-industry studies reveal about the influence of market structure on pricing and profitability?
What do studies of particular markets show?

3a)Interindustry Studies

R. Caves, "International Differences in Industrial Organization," in HIO.

R. Schmalensee, "Interindustry Studies of Structure and Performance," in HIO

S&R, Chapter 11.

H. Demsetz, "Industry Structure, Market Rivalry and Public Policy," The Journal of Law and Economics, 16 (April 1973), 1-9.

F. Fisher and J. McGowan, "On the Misuse of Accounting Rates of Return to Infer Monopoly Profits," American Economic Review, 73 (March 1983), 82-97.

M. Porter, "The Structure Within Industries and Companies' Performance," Review of Economics and Statistics, 61 (May 1979), 82-97.

I. Domowitz, R. Hubbard and B. Petersen, "Business Cycles and the Relationship Between Concentration and Price-Cost Margins," Rand Journal of Economics, 17 (Spring 1986), 1-17.

R. Hall, "The Relationship Between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, 96 (October 1988) 921-947.

J. Rotemberg and M. Woodford, "Oligopolistic Pricing and the Effects of Aggregate Demand on Economic Activity," Journal of Political Economy, 100 (1992), 1153-1207.

M. Smirlock, T. Gilligan, and W. Marshall, "Tobin's q and the Structure-Performance Relationship," American Economic Review, 74 (December 1984), 1051-1060.

R. Schmalensee, "Do Markets Differ Much?" American Economic Review, 75 (June 1985), 341-351.

M. Salinger, "The Concentration-Margin Relationship Reconsidered," Brookings Papers on Economic Activity: Microeconomics, (1990) 287-335.


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3b) Industry-specific studies

T. Bresnahan, "Empirical Studies of Industries with Market Power," in HIO.

O. Ashenfelter and D. Sullivan, "Nonparametric Tests of Market Structure: An Application to the Cigarette Industry," Journal of Industrial Economics, 35 (June 1987), 483-498.

S. Borenstein, "Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry," Rand Journal of Economics, 20 (Autumn 1989), 344-365.

G. Hurdle, et al., "Concentration, Potential Entry, and Performance in the Airline Industry," Journal of Industrial Economics, 38 (December 1989), 119-140.

S. Borenstein, "The Evolution of U.S. Airline Competition," Journal of Economic Perspectives, 6 (Spring 1992), 45-73.

J. Baker and T. Bresnahan, "Estimating the Residual Demand Curve Facing a Single Firm," International Journal of Industrial Organization, 6 (September 1988), 283-300.

T. Bresnahan, "Competition and Collusion in the American Automobile Industry: The 1955 Price War," Journal of Industrial Economics, 35 (June 1987), 457-482.

J. Panzar and J. Rosse, "Testing for 'Monopoly' Equilibrium," Journal of Industrial Economics, 35 (June 1987), 443-456.

R. Coterill, "Market Power in the Retail Food Industry: Evidence from Vermont," Review of Economics and Statistics," 68 (August 1986), 379-386.

C. Plott, "An Updated Review of Industrial Organization Applications of Experimental Methods," in HIO, or "Industrial Organization Theory and Experimental Economics," Journal of Economic Literature, 20 (December 1982), 1485-1527.


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4.PRICE DISCRIMINATION

L. Phlips, The Economics of Price Discrimination, Cambridge, 1981.

H. Varian, "Price Discrimination," in HIO.

H. Varian, "Price Discrimination and Social Welfare," American Economic Review 70, 651-9 (1980).

T. Holmes, "The Effects of Third-Degree Price Discrimination in Oligopoly," American Economic Review, 79 (March 1989), 244-50.

S. Borenstein and N. Rose, "Competition and Price Dispersion in the U.S. Airline Industry," Journal of Political Economy, August 1994.

A. Shepard, "Price Discrimination and Retail Configuration," Journal of Political Economy, 99 (February 1991), 30-53.


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5.THEORY OF THE FIRM

What determines the mix of activities carried out within firms?
When do we observe organizations instead of markets?
Do firms maximize profits?

D. Kreps, A Course in Microeconomic Theory, Princeton, 1990, Chapters 19 and 20.

Tirole, pp. 15-61.

5a) Theories of the Firm

A. Chandler, "Organizational Capabilities and the Economic History of the Industrial Enterprise," The Journal of Economic Perspectives, 6 (Summer 1992) 79-100.

R. Coase, "The Nature of the Firm," reprinted in G. Stigler and K. Boulding (eds.), Readings in Price Theory, Irwin, 1952, 331-351.

S. Grossman and O. Hart, "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, 94 (August 1986), 691-796.

O. Hart, "Economic Perspectives on the Theory of the Firm," Columbia Law Review, 1989.

B. Holmstrom and J. Tirole, "The Theory of the Firm," in HIO.

B. Holmstrom and P. Milgrom, American Economic Review, forthcoming.

L. Stole and J. Zwiebel, "Organizational Design and Technology Choice under Intrafirm Bargaining," mimeo 1994.

B. Klein, R. Crawford, and A. Alchian, "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, 21 (October 1978), 297-326.

O. Williamson, Markets and Hierarchies, Free Press, 1975.

O. Williamson, "Transaction-Cost Economics: The Governance of Contractual Relations, Journal of Law and Economics, 22 (October 1979) 233-262. (Reprinted in Williamson, the Economic Institutions of Capitalism, Free Press, 1985, Chapter 3.)


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5b) Tests of asset specificity

K. Monteverde and D. Teece, "Supplier Switching Costs and Vertical Integration in the Automobile Industry," Bell Journal of Economics, 13 (Spring 1982), 206-213.

K. Crocker and S. Masten, "Mitigating Contractual Hazards: Unilateral Options and Contract and Contract Length," Rand Journal of Economics, 19 (Autumn 1984), 327-343.

P. Joskow, "Vertical Integration and Long Term Contracts: The Case of Coal-Burning Electric- Generating Plants," Journal of Law, Economics and Organization, I (Spring 1985), 33- 80.

P. Joskow, "Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets," American Economic Review, 77 (March 1987), 168-185.

c)Financial organization and firm behavior<p J. Brander and T. Lewis, "Oligopoly and Financial Structure: The Limited Liability Effect," American Economic Review, 76 (December 1986), 956-970.

N. Rose, "Profitability and Product Quality: Economic Determinants of Airline Safety Performance," Journal of Political Economy, 98 (1990), 944-964.

J. Chevalier, "Debt and Product Market Competition: Local Market Entry, Exit and Expansion Decisions of Supermarket Chains," Harvard University, March 1993, mimeo.


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6. DYNAMICS OF MARKET STRUCTURE

6a)Strategic Models of Entry, Expansion and Entry Deterrence

Tirole, Chapters 8 and 9.

P. Aghion and P. Bolton, "Contracts as a Barrier to Entry," American Economic Review, 77:388-401, 1987.

J. Bulow, J. Geanakoplos and P. Klemperer, "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, 93 (June 1985), 488-511.

D. Fudenberg and J. Tirole, "The Fat Cat Effect, the Puppy Dog Ploy and the Lean and Hungry Look," American Economic Review, 74 (May 1984), 361-366.

R. Gilbert, "Mobility Barriers and the Value of Incumbency," in HIO.

J. Harrington, "Limit Pricing When the Potential Entrant is Uncertain of Its Cost Function," Econometrica, 54 (March 1986), 429-438.

P. Milgrom and J. Roberts, "Limit Pricing and Entry Under Incomplete Information: An Equilibrium Analysis," Econometrica, 50 (March 1982), 443-460.

A. Dixit, "The Role of Investment In Entry Deterrence," Economic Journal, 90 (March 1980), 95-106.

D. Fudenberg and J. Tirole, "Capital as a Commitment: Strategic Investment to Deter Mobility," Journal of Economic Theory, 31 (December 1983), 227-250.

J. Gelman and S. Salop, "Judo Economics: Capacity Limitation and Coupon Competition," Bell Journal of Economics, 14: 315-325, (1983).

R. Gilbert and X. Vives, "Entry Deterrence and the Free Rider Problem," Review of Economic Studies, 53 (January 1986), 71-83.

S. Klepper, "Entry, Exit, Growth and Inovation over the Product Life-Cycle," mimeo 1994.


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6b)Exit and turnover

M. Whinston, "Exit with Multiplant Firms," Rand Journal of Economics, 19 (Winter 1988), 568-588.

Dixit, "Entry and Exit Decisions Under Uncertainty," Journal of Political Economy, 97: 620- 638 (1989).

D. Fudenberg and J. Tirole, "A Theory of Exit in Duopoly," Econometrica, 54 (July 1986), 943-960.

P. Ghemawat and B. Nalebuff, "The Devolution of Declining Industries," Quarterly Journal of Economics, 105 (February 1990), 167-186.

H. Hopenhayn, "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, 60 (September 1992),1127-1150.

M. Deily, "Exit Strategies and Plant-Closing Decisions: The Case of Steel," Rand Journal of Economics, 22 (Summer 1991), 250-263.


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6c)Predation

J. Ordover and G. Saloner, "Predation, Monopolization and Antitrust," in HIO.

M. Burns, "Predatory Pricing and the Acquisition Costs of Competitors," Journal of Political Economy, 94 (April 1986), 266-296.

P. Bolton and D. Scharfstein, "A Theory of Predation Based on Agency Problems in Financial Contracting," American Economic Review, 80: 93-106 (1990).

J. McGee, "Predatory Price Cutting: The Standard Oil (NJ) Case," Journal of Law and Economics, 1 (October 1958), 137-169.

G. Saloner, "Predation, Mergers and Incomplete Information," Rand Journal of Economics, 19 (Winter 1988), 165-186.

D. Weiman and R. Levin, "Preying for Monopoly? The Case of Southern Bell Telephone Company, 1894-1912," Journal of Political Economy, 102 (February 1994) 103-126.

6d)Empirical analyses of entry

T. Bresnahan and P. Reiss, "Do Entry Conditions Vary Across Markets?" Brookings Papers on Economic Activity, (1987), 833-881.

T. Bresnahan and P. Reiss, "Entry and Competition in Concentrated Markets," Journal of Political Economy, 99 (October 1991), 977-1009.

S. Berry, "Estimation of a Model of Entry in the Airline Industry," Econometrica. 60 (July 1992), 889-918.

R. Smiley, "Empirical Evidence on Strategic Entry Deterrence," International Journal of Industrial Organization, 6 (June 1988), 167-180.

M. Lieberman, "Post Entry Investment and Market Structure in the Chemical Processing Industry," Rand Journal of Economics, 18 (Winter 1987), 533-549.


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6e) Intraindustry growth

B. Jovanovic, "Selection and the Evolution of Industry," Econometrica, (May 1982), 649- 670.

D. Evans, "Tests of Alternative Theories of Firm Growth," Journal of Political Economy, August 1987.

B. Hall, "Firm Size and Growth in U.S. Manufacturing," Journal of Industrial Economics, 35 (June 1987), 583-606.

Geroski, P. and A. Jacquemin, "The Persistence of Profits: A European Comparison," Economic Journal, 98 (June 1988), 375-89.

T. Dunne, M. Roberts, and L. Samuelson, "The Growth and Failure of U.S. Manufacturing Plants," Quarterly Journal of Economics, 104 (March 1989), 671-698.

B. Jovanovic and G. MacDonald, "The Life Cycle of a Competitive Industry," Journal of Political Economy, 102 (April 1994), 322-347.


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7.INNOVATION AND R&D

7a)Strategic models

Tirole, Ch. 10.

J. R. Reinganum, "The Timing of Innovation, Research, Development and Diffusion," in R. Schmalensee and R. D. Willig, (eds.) HIO, vol I.

D. Fudenberg and J. Tirole, 1985. "Preemption and Rent Equalization in the Adoption of New Technology," Review of Economic Studies, 52: 383-401.

D. Fudenberg, R. Gilbert, J.Stiglitz, and J. Tirole, 1983. "Preemption, Leapfrogging, and Competition in Patent Races," European Economic Review, 22:3-31.

N. Gallini, "Patent Policy and Costly Imitation," The Rand Journal of Economics, 23: 52-63 (1992).

R. Gilbert and D. Newberry, 1982, "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, 72:514-526.

C. Harris and J. Vickers, 1987, "Racing With Uncertainty," Review of Economic Studies 54: 1-22.

S. Lippman and K. McCardle, 1987. "Dropout Behavior in R&D Races With Learning," Rand Journal of Economics, 18:287-295.

G. C. Loury, 1979. "Market Structure and Innovation," Quarterly Journal of Economics, 93:395-410.

A. Daughety and J. Reinganum, "Product Safety: Liability, R&D and Signalling," mimeo, 1994.

P. Lin, "Tacit Collusion and R&D Competition," mimeo 1994.


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7b)Empirical studies of R&D and technology diffusion

A. Pakes, 1986, "Patents as Options: Some Estimates of the Value of Holding European Patent Stocks." Econometrica 54:755-784.

Z. Griliches, "Productivity, R&D and Basic Research at the Firm Level in the 1970's," American Economic Review, 76 (March 1986), 147-154.

Gort, M. and S. Klepper, "Time Paths in the Diffusion of Product Innovations," Economic Journal, (September 1982), 630-53.

S. Oster, "The Diffusion of Innovation Among Steel Firms: The Basic Oxygen Furnace," Bell Journal of Economics, 13 (Spring 1982), 45-56.

N. L. Rose and P. L. Joskow, "The Diffusion of New Technologies: Evidence from the Electric Utility Industry," Rand Journal of Economics, 21 (Autumn 1990), 354-373.

M. Karshenas and P. Stoneman, "Rank, Stock, Order, and Epidemic Effects in the Diffusion of New Process Technologies: An Empirical Model," RAND Journal of Economics, 24 (Winter 1993), 503-528.

M. Trajtenberg," The Welfare Analysis of Product Innovations, with an Application to Computed Tomography Scanners," Journal of Political Economy, 97: 444-479, (1989).

R. Henderson, "Underinvestment and Incompetence as Responses to Radical Innovation: Evidence from the Photolithographic Alignment Equipment Industry," RAND Journal of Economics, 24 (Summer 1993), 248-270.


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7c)Standardization and networks

Farrell, Monroe and Saloner, "Order Statistics, Interface Standards and Open Systems," 1993, mimeo.

M. Katz and C. Shapiro, "Network Externalities, Competition and Compatability," American Economic Review, 75: 424-440, (1985).

M. Katz and C. Shapiro, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, 94:822-841.

J. Farrell and G. Saloner, 1985, "Standardization, Compatibility, and Innovation," Rand Journal of Economics, 16: 70-83.

N. Gandal, "Hedonic Price Indexes for Spreadsheets and an Empirical Test for Network Externalities," RAND Journal of Economics, 25 (Spring 1994), 160-170.


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8.PRODUCT SELECTION

How should product differentiation be modelled?
How are product arrays determined in imperfect markets?
What effects do they have on market structure?
How is advertising determined, and what are its effects?

Tirole, Chapters 2 and 7.

8a)Product differentiation and monopolistic competition

C. Eaton and R. Lipsey, "Product Differentiation," in HIO.

H. Hotelling, "Stability in Competition," Economic Journal, 39 (March 1929), 41-57.

A. Dixit and J. Stiglitz, "Monopolistic Competition and Optimum Product Diversity," American Economic Review, 67 (June 1977), 297-308.

S. Salop, "Monopolistic Competition with Outside Goods," Bell Journal of Economics, 10 (Spring 1979), 141-156.

A. Shaked and J. Sutton, "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, 49 (January 1982), 3-13.

A. Shaked and J. Sutton, "Product Differentiation and Industrial Structure," Journal of Industrial Economics, 36 (1987), 131-146.

J. Sutton, Sunk Costs and Market Structure: Price Competition, Advertising and the Evolution of Concentration, Chapters 2 and 3, The MIT Press, 1991.

R. Schmalensee, "Sunk Costs and Market Structure: A Review Article," Journal of Industrial Economics, 40:125-134, 1992.

T. Bresnahan, "Sutton's Sunk Costs and Market Structure: Price Competition, Advertising and the Evolution of Concentration," RAND Journal of Economics, 23 (1992), 137-152.

A. Caplin and B. Nalebuff, "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, 59 (January 1991), 25-59.

A. dePalma, V. Ginsburgh, Y. Papageorgiou, and J. Thisse, "The Principle of Minimum Differentiation Holds Under Sufficient Heterogeneity," Econometrica, 53 (July 1985), 767-782.

S. Berry, "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, 25 (Summer 1994), 242-262.


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8b)Product differentiation and strategic behavior

S. Anderson, A. dePalma and J.F. Thisse, Discrete Choice Theory of Product Differentiation, MIT Press, 1992.

R. Schmalensee, "Entry Deterrence in the Ready-to-Eat Breakfast Cereal Industry," Bell Journal of Economics, 9 (Autumn 1978), 305-327.

K. Judd, "Credible Spatial Preemption," Rand Journal of Economics, 16 (Summer 1985), 153-166.

R. Schmalensee, "Product Differentiation Advantage of Pioneering Brands," American Journal of Economics, 72 (June 1982), 349-365.

J. Farrell and C. Shapiro, "Optimal Contracts with Lock-In," American Economic Review, 79, (1979), 51-68.

J. Farrell and C. Shapiro, "Dynamic Competition with Switching Costs," Rand Journal of Economics, 19 (Spring 1988), 123-137.

P. Klemperer, "Markets with Consumer Switching Costs," Quarterly Journal of Economics, Vol. 102, (1987), 375-394.

P. Klemperer, "The Competitiveness of Markets with Switching Costs," Rand Journal of Economics, Vol. 18 (1987), 138-150.

P. Klemperer, "Equilibrium Produce Lines: Competing Head-to-Head May Be Less Competitive," American Economic Review, 82 (September 1992), 740-755.

A. Beggs and Paul Klemperer, "Multiperiod Competition with Switching Costs," Econometrica, 60 (May 1992), 651-666.

P. Burton, "Product Portfolios and the Introduction of New Products: An Example from the Insecticide Industry," RAND Journal of Economics, 25 (Spring 1994), 128-140.


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9.ADVERTISING AND PRICE DISPERSION

9a)Theories of Advertising

G. Butters, "Equilibrium Distribution of Sales and Advertising Prices," Review of Economic Studies, 44 (October 1977), 465-492.

A. Dixit and V. Norman, "Advertising and Welfare," Bell Journal of Economics, 9 (Spring 1978), 1-17.

G. Grossman and C. Shapiro, "Informative Advertising with Differentiated Products," Review of Economic Studies, 51 (January 1984), 63-81.

R. Kihlstrom and M. Riordan, "Advertising as a Signal," Journal of Political Economy, 92 (June 1984), 427-450.

P. Nelson, "Advertising as Information," Journal of Political Economy, 82 (July/August 1974), 729-754.

R. Schmalensee, "Advertising and Market Structure," in J. Stiglitz and F. Mathewson (eds.), New Development in the Analysis of Market Structure, MIT, 1986, 373-396.

M. Stegeman, "Advertising in Competitive Markets," American Economic Review, 81 (March 1991), 210-223.

K. Bagwell and G. Ramey, "Coordination Economies, Advertising, and Search Behavior in Retail Markets," American Economic Review, 84 (June 1994), 498-517.


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9b)Advertising empirics

L. Benham, "The Effects of Advertising on the Price of Eyeglasses," Journal of Law and Economics, 15 (October 1972), 337-352.

T. Bresnahan, "The Demand for Advertising by Medium: Implications for the Economies of Scale in Advertising," in P. Ippolito and D. Scheffman, eds., Consumer Protection Economics, Federal Trade Commission, 135-170, 1984.

W. Comanor and T. Wilson, "The Effect of Advertising on Competition: A Survey," Journal of Economic Literature, 17 (June 1979), 453-476.

J. Schroeter, S. Smith and S. Cox, "Advertising and Competition in Routine Legal Service Markets: An Empirical Investigation," Journal of Industrial Economics, 36 (September 1987), 49-60.

P. Ippolito and A. Mathios, "Information, Advertising and Health: A Study of the Cereal Market," Rand Journal of Economics, 21 (Autumn 1990), 459-480.

J. Rizzo and R. Zeckhauser, "Advertising and Entry: The Case of Physician Services," Journal of Political Economy, 98 (June 1990), 476-500.

M. Roberts and L. Samuelson, "An Empirical Analysis of Dynamic, Nonprice Competition in an Oligopolistic Industry," Rand Journal of Economics, 19 (Summer 1988), 200-220.


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10. AUCTIONS

10a) Basics

Revelation principle, incentive compatibility, individual rationality, basic optimal auctions theorem. Source: Handout

McAfee, R. Preston and John McMillan, "Auctions and Bidding", Journal of Economic Literature, June 1987.

Myerson, Roger, "Optimal Coordination Mechanisms in Generalized Principal-Agent Problems, J Mathematical Economics 10, 1982, 67-81.

Myerson, Roger, "Optimal Auction Design," Math of Operations Research 6, 1981, 58- 73.

Milgrom, Paul, "The Economics of Competitive Bidding: A Selective Survey", in Leonid Hurwicz, David Schmeidler and Hugo Sonnenschein, eds., Social Goals and Social Organization, Cambridge: Cambridge University Press, 1985.

Vickrey, William, "Counterspeculation, Auctions, and Competitive Sealed Tenders," J Finance 16, 1961, 8-37.

Wilson, Robert, "Strategic Analysis of Auctions", in Robert Aumann and Sergio Hart, eds., The Handbook of Game Theory, Amsterdam: North-Holland, 1991.

Wilson, Robert, "A Bidding Model of Perfect Competition", Review of Economic Studies, Oct. 1977, 44, 511-18.

Roger Guesnerie and J.J. Lafont, "A Complete Solution to a Class of Principal-Agent Problems with Applications to the Control of a Self-Managed Firm, J Public Economics 25, 1984, 329- 69.


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10b) Variations on optimal auctions

(i) Entry

McAfee, R. Preston and John McMillan, "Auctions with Entry", Economics Letters 23, 1987: 343-7.

McAfee, R. Preston and Daniel Vincent, "Updating the Reserve Price in Common Value Auctions" American Economic Review Papers and Proceedings, May 1992, 512-8.

McAfee, R. Preston, and John McMillan, "Auctions with a Stochastic Number of Bidders", Journal of Economic Theory, 1987b, 43, 1-19.

(ii) Risk Aversion

Matthews, Steven, "Selling to Risk Averse Buyers with Unobservable Tastes," Journal of Economic Theory 30, 1983, 370-400.

(iii) Moral Hazard

McAfee, R. P. and John McMillan, "Competition For Agency Contracts", Rand Journal of Economics, Summer 1987, 296-307.

(iv) Costly Communication

McAfee, R. P. and John McMillan, "Search Mechanisms", Journal of Economic Theory 44, February 1988: 99-123.

(v) Multiple Unit Auctions

Milgrom, Paul and Robert Weber, "A Theory of Auctions and Competitive Bidding II", unpublished manuscript, Northwestern University, 1982.

McAfee, R. Preston, and Vincent, Daniel, "Sequentially Optimal Auctions," CMSEMS Discussion Paper No.1104, 1994.

Tenorio, R., Revenue-Equivalence and Bidding Behavior in a Multi-Unit Auction Market: An Empirical Analysis, Review of Economics and Statistics, 1993.

Wilson, Robert, Auctions of Shares, Quarterly Journal of Economics, 93, 675-698, 1979.

Weber, Robert, "Multiple Object Auctions," in Auctions, Bidding and Contracting: Uses and Theory, (R. Englebrecht-Wiggans, M. Shubik, and R. M. Stark, Eds), New York University Press, New York, 1983.


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10c) Correlated Signals

Cremer, Jacques, and Richard McLean, "Optimal Selling Strategies Under Uncertainty for a Discriminating Monopolist when Demands are Interdependent," Econometrica 53, 1985, 345- 61.

McAfee, R. P., John McMillan and Philip Reny, "Extracting the Surplus in Common Value Auctions", Econometrica 57, no.6, November, 1989: 1451-9.

McAfee, R. Preston and Philip Reny, "Correlated Information and Mechanism Design", Econometrica 60, No. 2, March 1992, 395-421.

10d) Affiliation

Tools. Source: Handout

Milgrom, Paul, and John Roberts, Rationalizability, Learning and Equilibrium in Games with Strategic Complementarities, Econometrica 58, November, 1990, 1255-1278.

Milgrom, Paul and Robert Weber, "A Theory of Auctions and Competitive Bidding," Econometrica 50, 1982, 1089-1122.


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10e) Econometrics of Auctions

McAfee, R. Preston, and Daniel Vincent, "Updating the Reserve Price in Common Value Auctions" American Economic Review Papers and Proceedings, May 1992, 512-8.

McAfee, R. Preston, and Daniel Vincent, "The Price Decline Anomaly", Journal of Economic Theory 60, June, 1993, 191-212.

Ashenfelter, Orley, "How Auctions Work for Wine and Art," Journal of Economic Perspectives 3, 1989, 23-36.

Ashenfelter, Orley and David Genosove, "Testing for Price Anomalies in Real-Estate Auctions", American Economic Review (Papers and Proceedings), May, 1992, 82, 501-05.

Hendricks, Kenneth, Robert Porter, and Bryan Boudreau, "Information and Returns in OCS Auctions: 1954-1969", Journal of Industrial Economics, June 1987, 35, 517-42.

Hendricks, Kenneth, Robert Porter, and Charles Wilson, "Auctions for Oil and Gas Leases with an Informed Bidder and a Random Reservation Price", Econometrica, November, 1994, 62, 1415-1144.

Hendricks, Kenneth and Robert Porter, "Joint Bidding in Federal OCS Auctions", American Economic Review (Papers and Proceedings), May, 1992, 82, 506-511.

McMillan, John, "Auctioning the Spectrum," Journal of Economic Perspectives, Summer, 1994.

Laffont, J.J. and Vuong, Econometrica


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