Industrial Organization for Entrepreneurs (MiE)
Economics does not teach us how to live: it helps us understand the world we live in. This course examines some aspects of firms that now produce most of what we consume. Why are large firms typical in some industries (e.g. automobiles, mining, steel making) while small firms abound in other industries (e.g. barbershops, bakeries)? Why are firms of different sizes even within an industry? Why do some firms make everything themselves (e.g. pharmaceuticals) while other firms design and sell items they neither make nor even assemble (e.g. Apple’s I-phone)? These are interesting questions that the course will help you answer.
Industrial Organisation (I-O) emerged as a specialized field primarily to enforce competition policy. Some European governments sought “national champions” but the U.S. sought to prevent monopolies and firms from colluding. Railways, electric utilities, radio broadcasters, airlines etc. were regulated since the late 1800s, and academic economists developed various theories to detect and remedy the resulting harm through regulations.
These regulations were assumed to work until a few skeptical economists found in the 1970s that regulated prices were higher, not lower. Regulations were worse than ineffective: they favoured the incumbent! As these surprising findings were replicated, the entire field changed: theory of regulatory capture showed how regulations are enacted and operate. Both information and incentive to act appropriately are often absent. The deregulation movement followed: airline and telecom deregulation have been hugely successful, but electricity deregulation in California was a disaster (we will examine why). After the 2008 financial crisis, the regulatory pendulum has since been swinging back, but effective regulation remains a challenge.
| Date | Time |
|---|---|
| Tuesday, 29.10.2019 | 08:00 - 11:15 |
| Thursday, 31.10.2019 | 08:00 - 11:15 |
| Thursday, 07.11.2019 | 08:00 - 13:00 |
| Wednesday, 13.11.2019 | 08:00 - 11:15 |
| Friday, 06.12.2019 | 09:45 - 11:15 |
It would help to know some economics, particularly Price Theory (i.e. Microeconomics), but having an open and skeptical mind is more important. Everyone can understand the reasoning and my summaries of the main findings, and those with statistics and econometrics can read salient studies for themselves.
Your effort determines what you learn. There is plenty to read, and the suggested readings (listed below after the outline of lectures) are a starting point. WHU students often get by without reading, but some path-breaking articles on the list are well worth the effort. But you must question what you read. The examination will test your understanding, not your reproducing the articles or class discussions.
Stop by my office(no appointment needed) to discuss any question or concern.
- 40% written exam
- 30% case study (individual)
- 30% class participation