Industrial Organization: Contemporary Theory and Empirical Applications

List of Figures. List of Tables. About the Authors. Preface to the Fourth Edition. Part I: Foundations: . 1. Industrial Organization: What, How, and Why? . 1.1 What Is Industrial Organization?. 1.2 How We Study Industrial Organization. 1.3 Why? Antitrust and Industrial Organization Theory. Summary. Problems. References. Appendix: Excerpts from Key Antitrust Statutes. 2. Basic Microeconomics . 2.1 Competition versus Monopoly: The Poles of Market Performance. 2.2 Profit Today versus Profit Tomorrow: Firm Decision-making over Time. 2.3 Efficiency, Surplus, and Size Relative to the Market. Summary. Problems. References. 3. Market Structure and Market Power . 3.1 Measuring Market Structure. 3.2 Measuring Market Power. 3.3 Empirical Application: Monopoly Power-How Bad Is It?. Summary. Problems. References. 4. Technology and Cost . 4.1 Production Technology and Cost Functions for the Single Product Firm. 4.2 Sunk Cost and Market Structure. 4.3 Costs and Multiproduct Firms. 4.4 Noncost Determinants of Industry Structure. 4.5 Empirical Application: Cost Function Estimation-Scale and Scope Economies. Summary. Problems. References. Part II: Monopoly Power in Theory and Practice: . 5. Price Discrimination and Monopoly: Linear Pricing . 5.1 Feasibility of Price Discrimination. 5.2 Third-degree Price Discrimination or Group Pricing. 5.3 Implementing Third-degree Price Discrimination or Group Pricing. 5.4 Product Variety and Third-degree Price Discrimination or Group Pricing. 5.5 Third-degree Price Discrimination or Group Pricing and Social Welfare. Summary. Problems. References. 6. Price Discrimination and Monopoly: Non-linear Pricing . 6.1 First-degree Price Discrimination or Personalized Pricing. 6.2 Second-degree Price Discrimination or Menu Pricing. 6.3 Social Welfare with First- and Second-degree Price Discrimination. Summary. Problems. References. 7. Product Variety and Quality Under Monopoly . 7.1 A Spatial Approach to Horizontal Product Differentiation. 7.2 Monopoly and Horizontal Differentiation. 7.3 Is There Too Much Product Variety?. 7.4 Monopoly and Horizontal Differentiation with Price Discrimination. 7.5 Vertical Product Differentiation. 7.6 Empirical Application: Price Discrimination, Product Variety, and Monopoly versus Competition. Summary. Problems. References. Appendix A: Location Choice with Two Shops. Appendix B: The Monopolist's Choice of Price When Her Shops Have Different Costs. 8. Commodity Bundling and Tie-in Sales . 8.1 Commodity Bundling and Price Discrimination. 8.2 Required Tie-in Sales. 8.3 Complementary Goods, Network Externalities, and Monopoly Pricing. 8.4 Antitrust, Bundling, and Tie-in Sales. Summary. Problems. References. Appendix: Formal Proof of the Inefficiency Induced by the Marketing of Complementary Goods by Separate Monopolists. Part III: Oligopoly and Strategic Interaction: . 9. Static Games and Cournot Competition . 9.1 Strategic Interaction: Introduction to Game Theory. 9.2 Dominant and Dominated Strategies. 9.3 Nash Equilibrium as a Solution Concept. 9.4 Static Models of Oligopoly: The Cournot Model. 9.5 Variations on the Cournot Theme: Many Firms and Different Costs. 9.6 Concentration and Profitability in the Cournot Model. Summary. Problems. References. 10. Price Competition . 10.1 The Bertrand Duopoly Model. 10.2 Bertrand Reconsidered. 10.3 Bertrand in a Spatial Setting. 10.4 Strategic Complements and Substitutes. 10.5 Empirical Application: Brand Competition and Consumer Preferences-Evidence from the California Retail Gasoline Market. Summary. Problems. References. 11. Dynamic Games and First and Second Movers. 11.1 The Stackelberg Model of Quantity Competition. 11.2 Sequential Price Competition. 11.3 Credibility of Threats and Nash Equilibria for Dynamic Games. 11.4 The Chain Store Paradox. Summary. Problems. References. Part IV: Anticompetitive Strategies: . 12. Limit Pricing and Entry Deterrence . 12.1 Monopoly Power and Market Structure Over Time: Some Basic Facts. 12.2 Predatory Conduct and Limit Pricing. 12.3 Preemption and the Persistence of Monopoly. 12.4 Evidence on Predatory Capacity Expansion. Summary. Problems. References. 13. Predatory Conduct: More Recent Developments . 13.1 Predatory Pricing: Myth or Reality?. 13.2 Predation and Imperfect Information. 13.3 Contracts as a Barrier to Entry. 13.4 Predatory Conduct and Public Policy. 13.5 Empirical Application: Entry Deterrence in the Pharmaceutical Industry. Summary. Problems. References. 14. Price Fixing and Repeated Games . 14.1 The Cartel's Dilemma. 14.2 Repeated Games. 14.3 Collusion: The Role of the Antitrust Authorities. 14.4 Empirical Application: Estimating the Effects of Price Fixing. Summary. Problems. References. 15. Collusion: Detection and Public Policy . 15.1 The Cartel Problem. 15.2 Factors that Facilitate Collusion. 15.3 An Illustration: Collusion on the NASDAQ Exchange. 15.4 Detecting Collusion among Firms. 15.5 Cartel Leniency (Amnesty) Programs. 15.6 Empirical Application: Experimental Investigation of Leniency Programs. Summary. Problems. References. Part V: Contractual Relations between Firms: . 16. Horizontal Mergers . 16.1 Horizontal Mergers and the Merger Paradox. 16.2 Mergers and Cost Synergies. 16.3 The Merged Firm as a Stackelberg Leader. 16.4 Horizontal Mergers and Product Differentiation. 16.5 Public Policy toward Horizontal Mergers. 16.6 Empirical Application: Evaluating the Impact of Mergers with Computer Simulation. Summary. Problems. References. Appendix A: Bertrand Competition in a Simple Linear Demand System. Appendix B: Equilibrium Prices in the Spatial Model without a Merger. Appendix C: Equilibrium Prices in the Spatial Model after Firm 1 and Firm 2 Merge. 17. Vertical and Conglomerate Mergers . 17.1 Procompetitive Vertical Mergers. 17.2 Possible Anticompetitive Effects of Vertical Mergers. 17.3 Formal Oligopoly Models of Vertical Integration. 17.4 Conglomerate Mergers. 17.5 A Brief Digression on Mergers and the Theory of the Firm. 17.6 Empirical Application: Vertical Integration in the Ready-mixed Concrete Industry. Summary. Problems. References. 18. Vertical Price Restraints . 18.1 Resale Price Maintenance: Some Historical Background. 18.2 Vertical Price Restraints as a Response to Double Marginalization. 18.3 RPM Agreements and Retail Price Discrimination. 18.4 RPM Agreements to Ensure the Provision of Retail Services. 18.5 Retail Price Maintenance and Uncertain Demand. Summary. Problems. References. Appendix: Manufacturer's Optimal Wholesale Price When Retailer Discriminates between Two Markets. 19. Nonprice Vertical Restraints . 19.1 Upstream Competition and Exclusive Dealing. 19.2 Exclusive Selling and Territorial Arrangements. 19.3 Aftermarkets. 19.4 Public Policy toward Vertical Restraints. 19.5 A Brief Discussion of Franchising and Divisionalization. 19.6 Empirical Application: Exclusive Dealing in the U.S. Beer Industry. Summary. Problems. References. Part VI: Nonprice Competition: . 20. Advertising, Market Power, and Information . 20.1 The Extent of Advertising. 20.2 Advertising, Product Differentiation, and Monopoly Power. 20.3 The Monopoly Firm's Profit-maximizing Level of Advertising. 20.4 Advertising as Consumer Information. 20.5 Persuasive Advertising. 20.6 Advertising and Signaling. 20.7 Suppressed Advertising Content. 20.8 Truth versus Fraud in Advertising. Summary. Problems. References. 21. Advertising, Competition, and Brand Names . 21.1 Advertising as Wasteful Competition. 21.2 Advertising and Information in Product-differentiated Markets. 21.3 What's in a Brand Name?. 21.4 Too Much or Too Little Advertising: The Question Revisited. 21.5 Cooperative Advertising. 21.6 Empirical Application: Advertising, Information, and Prestige. Summary. Problems. References. 22. Research and Development . 22.1 A Taxonomy of Innovations. 22.2 Market Structure and the Incentive to Innovate. 22.3 A More Complete Model of Competition via Innovation. 22.4 Evidence on the Schumpeterian Hypothesis. 22.5 R&D Cooperation between Firms. 22.6 Empirical Application: R&D Spillovers in Practice. Summary. Problems. References. 23. Patents and Patent Policy . 23.1 Optimal Patent Length. 23.2 Optimal Patent Breadth. 23.3 Patent Races. 23.4 Monopoly Power and "Sleeping Patents". 23.5 Patent Licensing. 23.6 Recent Patent Policy Developments. 23.7 Empirical Application: Patent Law and Practice in the Semiconductor Industry. Summary. Problems. References. Part VII: Networks and Auctions: . 24. Network Issues. 24.1 Monopoly Provision of a Network Service. 24.2 Networks, Competition, and Complementary Services. 24.3 Systems Competition and the Battle over Industry Standards. 24.4 Network Goods and Public Policy. 24.5 Empirical Application: Network Externalities in Computer Software-Spreadsheets. Summary. Problems. References. 25. Auctions and Auction Markets . 25.1 A Brief Taxonomy of Auctions. 25.2 The Revenue Equivalence Theorem. 25.3 Common Value Auctions. 25.4 Auction Design: Lessons From Industrial Organization. Summary. Problems. References. Answers to Practice Problems. Index