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Imperfectly competitive markets and behaviour of firms. Monopoly models: standard, dominant firm, durable good, natural monopoly, perfectly contestable markets, price discrimination. Oligopoly models: Cournot, Bertrand, product differentiation. Measuring market power, competition policy.
Industrial Organization (IO) studies operation and performance of imperfectly competitive markets as well as the behaviour of firms in these markets. The big questions are: why are firms and markets organized the way they are; how does the organization of markets determine how firms behave and how the markets perform; and how does the behaviour of firms affect the structure and performance of markets? This field of economics has developed substantially in the past few decades, especially through the application of non-cooperative game theory, and has had strong influence on the Commerce Act and regulation in New Zealand.ECON329 is designed to introduce the student to selected topics in modern IO. We will discuss why firms exist and what limits their size. We will study the behaviour of firms in markets that are structured as monopolies, dominant firms or oligopolies, and we will analyse the welfare implications of these market structures. It is well known that imperfectly competitive markets may operate inefficiently, which leaves room for improvements by regulators. We will look at the measures regulators use for assessing and controlling the exercise of market power.
Learning Outcomes and their mapping to assessmentThe broad objectives for the course are as follows:LO1: Demonstrate an understanding of market power, its definition and sources as well as public policy measures to identify and combat market power (assignments, discussion forums, term paper and final exam)LO2: Demonstrate an understanding of factors that affect the level of vertical integration of a firm (Assignment 1, final exam)LO3: Demonstrate an ability to analyse different situations where the industry has a monopoly or a dominant firm (Assignment 2, discussion forum, final exam)LO4: Demonstrate an ability to analyse different situations where the industry has a small number of large firms (discussion forum, term paper, final exam)LO5: Demonstrate knowledge of Part 2 and Part 3 the New Zealand Commerce Act 1986 and understanding of how it relates to economic theory (discussion forum, term paper, final exam)Detailed learning outcomes for each module are given on Learn.Detailed learning outcomes for each module are given on Learn.
This course will provide students with an opportunity to develop the Graduate Attributes specified below:
Critically competent in a core academic discipline of their award
Students know and can critically evaluate and, where applicable, apply this knowledge to topics/issues within their majoring subject.
Employable, innovative and enterprising
Students will develop key skills and attributes sought by employers that can be used in a range of applications.
Engaged with the community
Students will have observed and understood a culture within a community by reflecting on their own performance and experiences within that community.
ECON207 or ECON208 or ECON202 RP: ECON208
Students must attend one activity from each section.
There are no required texts. You will likely find Church & Ware the most useful reference. It is available on-line (Learn has a link to it). There should also be some hard copies available in the bookstore and in the restricted loans library.Church, J. & Ware, R. Industrial Organization: A Strategic Approach. McGraw Hill, 2000.The following books are also useful references, and can be found in the restricted loans:Motta, M., Competition Policy - Theory and Practice. Cambridge, 2004.Carlton, D.W. & Perloff, J.M. Modern Industrial Organization, 4th edition, Addison-Wesley, 2005.
The ECON 329 Course Handbook includes the lecture and tutorial schedule, a comprehensive set of lecture notes, the problem sets, last two years’ assignments and final exams, as well as selected articles. The handbook is available on Learn for self-printing and binding (I recommend wiro binding) or electronic access, downloaded to your iPad or iPhone or similar! Please make sure you bring along the Handbook (printed copy or have electronic access) to all of your lectures and tutorials.
Domestic fee $806.00
International fee $3,513.00
* Fees include New Zealand GST and do not include any programme level discount or additional course related expenses.
For further information see
Department of Economics and Finance.