Is Microsoft really a monopoly and has it engaged in practices designed to run its rivals out of the market? What's the reason behind all the mergers you've been reading about in the telecommunications industry? Do firms still try to collude? And why does the price of airline tickets change so much? Perhaps the most important question in each of these examples, what is the impact of firms' competitive strategies on our economic welfare?
Industrial Organization tackles questions like these by applying economic theory to the study of large firms and their competitive strategies. After beginning with a review of the theory of the firm, you will study how real world firms can successfully collude, and how a firm can price its products and employ other tactics to keep rivals from successfully competing with it. Other aspects of competitive behavior that you will study include advertising, and research and development activity as competitive strategies. You will also analyze the phenomenon of vertical integration and what drives firms to structure themselves this way. Finally, you will study how global competition influences the structure of industries and of firms.
To apply theory to the real world, students will keep a journal on a selected industry, to be presented as a written report at the end of the semester. Students will also stage a mock trial United States vs. Microsoft using actual trial materials for research.
Prerequisite: Econ 100
Grades determined by three exams and five short writing assignments.