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Chania, June 25th – July 9th, 2010  
  


Module 1: Industry Economics and Game Theory for the Analysis of Market Power (mainly targeted to non-economists) (16 a.h.1)

Outline of Course Contents
Prof. Nikolaos VETTAS

 
  • The market mechanism, requirements for the effectiveness of price determination and sources of market failure
  • Market failure and efficiency - Types of efficiency
  • Classical market failures: Natural monopoly, Public goods, Externalities
  • Coase theorem
  • Welfare criteria
  • Perfect competition and its welfare implications
  • Monopoly and welfare losses arising from monopoly
  • Introduction to Game Theory: description of a game, basic concepts, simple examples of games, strategic choice, solution concepts: Nash equilibrium, pure and mixed strategies, repeated games.
  • Durable goods monopoly - Monopoly and quality
  • Price discrimination; necessary conditions, degrees and effects on competition
  • Bundling and monopoly
  • Price discrimination in regulated industries
  • Oligopoly and interdependence - Models of imperfect competition.
  • Profitability and market structure - measurement of market concentration
  • Theories of concentration
  • State Intervention in the presence of market power
  • Types of Intervention - brief historical review of EU, USA
  • Public firms Vs. regulation of private monopolies
  • The weaknesses of public firms
  • Privatization and market liberalization: developments in the last 2 decades
  • Competition Policy (CP) and differences from Sectoral Regulation
  • Detecting and measuring market power.
  • Identifying relevant markets: Market Definition and the SSNIP test - Substitution of Demand, Substitution of supply. Quantitative tests. Problems in new economy markets. Case studies
  • Identifying significant market power - Static indicators and their rationale: market share and market concentration
  • Issues in differentiated product markets
  • Differential efficiencies, Innovation and competition
  • Potential competition and barriers to entry; limit pricing; structural vs. strategic barriers to entry
  • New economy markets
  • Case studies
  • Approaches to confronting MP in CP: per se rules Vs. rule of reason, or economics-based Vs. form-based approaches. Case studies

Module 1

Module 2

Module 3

Module 4

Module 5

Module 6

Module 7

Module 8

1 a.h. = academic hour (50 minutes).


    

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