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Industrial Economics

Code 12115
Year 3
Semester S2
ECTS Credits 6
Workload TP(60H)
Scientific area Economics
Entry requirements The course is based on microeconomic theory. It is recommended for solid knowledge in this area.
Mode of delivery The teaching method is face-to-face, with lectures both theoretical and practical. Accordingly, students are invited to interact with the teacher and with colleagues in the resolution of the proposed exercises. The degree of commitment to these exercises will be taken into consideration in the final evaluation.
Work placements Not applicable
Learning outcomes This curricular unit (CU) covers the main issues and themes of industrial economics. Its objectives are:
i) Provide analytical skills required to understand the real issues in Industrial Economics;
ii) Understand the forms of strategic interaction between the firms, in the design of the industrial structure;
iii) Understand the functioning of markets with imperfect competition structures, particularly oligopolistic markets; and
iv) Identify strategic behavior models that allow to analyze issues of competition policy and regulation.
The student acquires both skills and tools to appraise the degree of competition in the markets. At the end of the CU, the student should be able to explain the different forms of strategic behaviour as well as identify the objectives and procedures associated with each one. The student should be able to distinguish concentration enabling synergies from those who seek mainly to increase market power.
Syllabus 1. Market structure and concentration
1.1. Paradigm S-C-P
1.2. Measures of market concentration and volatility
1.3. Market power analysis
2. Imperfect competition, static and dynamic games
2.1. Simultaneous and sequential quantity and price setting
2.2. Monopolistic competition
2.3 Cartel
3. Barriers to competition
3.1. Entry barriers
3.2. Mobility and exit barriers
3.3. Contestable markets and industrial structure
3.4. Natural monopoly
3.5. Multi-production
3.5.1. With constant proportions
3.5.2. With variable proportions
3.5.3. Economies of Scale and Scope
4. Oligopoly and strategic interaction
4.1. Entry deterrence
4.1.1. Product differentiation
4.1.2. Capacity expansion
4.1.3. Limit pricing
4.2. Advertising
4.3. Predatory pricing
4.4. Small scale entry
4.5. Research & Development
4.5.1. Market structure and incentives to R&D
4.5.2. Private incentives and social welfare
5. Mergers & Acquisitions
5.1. The relevance of the M&A
5.2. M&A and the life cycle of industries
5.2. Horizontal mergers
5.2.1. M&A paradox
5.2.2. M&A and costs synergies
5.2.3. Strategic behaviour and Stackelberg’s leadership
5.3. Vertical mergers
5.3.1 Internalization of activities vs. use of market
5.3.2 Quasi-vertical integration
5.3.3 Double marginalization and the social welfare.
6. Competition and regulation policies
6.2. Market failures
6.3. Market concentration and abuse of dominant market position
6.4. Regulation and sharing of infrastructure
Main Bibliography - Marques, A. C., Macedo, D., Pereira, D., Leal, P., Neves, S. (2018). ECONOMIA INDUSTRIAL - Teoria e Prática: Abordagem estratégica com teoria de jogos. EDIÇÕES ALMEDINA, S.A., (386 pp) Coimbra. ISBN: 978-972-40-7483-2.
- Tirole, J. 1988. The Theory of Industrial Organization, Cambridge, Mass.: MIT Press.
- Church, J. and Ware, R., 2000. Industrial Organization: A Strategic Approach, McGraw Hill.
- Baumol, W., Panzar, J. and Willig, R., 1982. Contestable markets and the theory of industry structure, San Diego: Harcourt Brace Jovanovich.
- Bhattacharyya, S.C., 2011. Energy Economics, Concepts, Issues, Markets and Governance. Springer.
- Carlton, D. W., Perloff, J. M. 2000. Modern Industrial Organization. 3rd edition. Addison-Wesley.
- Cabral, L., 2000. Introduction to industrial organization, Cambridge, Mass.: MIT Press MIT Press.
- Martin, S., 2002. Advanced Industrial Economics, 2nd Edition, Oxford: Blackwell.
Language Portuguese. Tutorial support is available in English.
Last updated on: 2023-06-20

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