1 Industrial Organization 2 Industrial Organisation and Market Structure (East and West) Selected Topics Central European University, Economics Department, Spring Semester, 2005 Course outline and reading list by Professor Ádám Török 1. Introduction in the theory of the firm. The appearance of the firm in literature and legislation. Possible approaches to the firm. The M form firm. Elements of transaction cost theory. The problem of transfer pricing. Limits to transaction cost theory the Coase theorem. The multidimensional firm. 2. Foundations of microeconomic policies. Interactions between competition policy, industrial policy and trade policy. Definitions of these policies, their scope and relevance. The changing balance between competition policy and industrial policy and their complementarity. Arguments for and against industrial policy. Technology policy as a subset of industrial policy. Is it inevitable to design transition specific micro policies? 3. The development of competition policy thinking. The SCP model. The Antitrust Paradox. The American European debate on the scope of competition policy and its objectives. Main issues in American and EU competition policies. Fields to be covered by competition policies. The problems of relevant markets and market dominance. 4. Competition policies in the transition and case studies on competition policy. Initial steps towards setting up the legal and institutional framework. First and second generation competition laws. The changing structure of case material and the scope of competition policy. Issues of adjustment to EU requirements. Cases will be selected in order to demonstrate each important field of competition policy in transition countries: merger control, abuse of dominance, cartels and consumer
deception. Block exemptions as an example of interaction between competition policy and technology policy. 2 5. State aids and competition policy. Fundamentals of the economics of subsidisation externalities versus government interventions towards offsetting them. Sources of externalities such as strategic trade policy, factor endowments, subsidies related competition between governments. Current policies in the U.S. and the EU towards subsidies. State aids in the transition economies and their assessment. 6. Issues of innovation, R&D and technology policy. The concept of innovation a market structure based approach. Models of the diffusion of innovation (the linear model, the random model, the triple helix model, etc.). Innovation and R&D on the firm level. Indicators of R&D on the supply side and the demand side. A survey of R&D and innovation policies with a special emphasis on EE countries. R&D policy as a special field of state subsidies. Is there an optimal role for government in promoting R&D?
3 Readings: Ad 1.: Williamson, O.: The Economic Institutions of Capitalism. The Free Press/Macmillan, 1985. Chapters 1 3. Kapás, J.: An Attempt to Create a Multidimensional Theory of the Firm: Taking a Generalised Perspective. Acta Oeconomica, Vol. 53. Nr.2. 2003. 145 174. Ad 2.: Bork, Robert H. (1993): The Antitrust Paradox. A Policy at War with Itself. The Free Press, New York, 1993. 479. (Chapters 1, 6, 7) Lloyd, P.J. (1998): Globalisation and Competition Policies. Weltwirtschaftliches Archiv, Band 134 (1998), Heft 2. 161 185. Ad 3.: Scherer, F.M. (1994): Competition Policies for an Integrated World Economy. The Brookings Institution, Washington, D. C. 1994. Kühn, K. Seabright, P. Smith, A. (1992): Competition Policy Research: Where Do We Stand? CEPR Occasional Paper No. 8 (July 30). Centre For Economic Policy Research, London, 1992. Lipczynski, John Wilson, John (2001): Industrial Organisation. An Analysis of Competitive Markets. Prentice Hall, 2001. Chapters 5 and 6. Ad 4.: Fingleton, John Fox, Eleanor Neven, Damien Seabright, Paul (1996): Competition Policy and the Transformation of Central Europe. Centre for Economic Policy Research, London, 1996. 253. (chapters 1 4 and 7). Török, Ádám (2004): EU Accession and the Evolution and Design of Competition Policy: The Case of Hungary. In: Landesmann, Michael A. Rosati, Dariusz K. (eds., 2004): Shaping the New Europe. Economic Policy Challenges of European Union Enlargement. Palgrave Macmillan, Houndmills, Basingstoke New York, NY. 117 145. Ad 5.: Besley, Timothy Seabright, Paul: The effects and policy implications of state aids to industry: an economic analysis. Economic Policy. No. 28. April 1999, 15 56.
4 Ad 6.: Pavitt, Keith (1999): Technology, Management and Systems of Innovation. Edward Elgar, Cheltenham, UK Northampton, USA. 250. Chapters 1, 2, 7, 13. Mani, Sunil (2002): Government, Innovation and Technology Policy. An International Comparative Analysis. Edward Elgar, Cheltenham, UK Northampton, USA. 379. Chapters 1, 2, 3, 9, 10. Lipczynski, John Wilson, John (2001): Industrial Organisation. An Analysis of Competitive Markets. Prentice Hall, 2001. Chapter 8.
5 Suggested readings: Ad 1.: Milgrom, P. Roberts, J.: Economics, Organization & Management. Prentice Hall, 1992. Plasschaert, Sylvain (1995): Recent books on transfer pricing: a review article. Transnational Corporations Vol. 4., Nr.1. April 1995. 97 112. Ad 2.: Hay, Donald A. Liu, Guy S. (1997): The Efficiency of Firms: What Difference Does Competition Make? The Economic Journal Vol. 107. (1997 May), 597 617. Nickell, Stephen J. (1996): Competition and Corporate Performance. Journal of Political Economy, 1996. Vol. 104., No. 4. 724 746. Vickers, John (1995): Concepts of Competition. Oxford Economic Papers, Vol. 47. (1995), 1 23. Buigues, Pierre Jacquemin, Alexis Sapir, André (1995, eds.): European Policies on Competition, Trade and Industry. Conflict and Complementarities. Edward Elgar, Aldershot, 1995. (see below for chapters) Buigues, Pierre Jacquemin, Alexis Sapir, André (1995): Introduction: Complementarities and Conflicts in EC Microeconomic Policies. In: Buigues Jacquemin Sapir (1995), xii xxii. Gual, Jordi (1995): The three common policies: an economic analysis. In: Buigues Jacquemin Sapir (1995), 3 48. Ad 3: Areeda, Philip Turner, Donald (1975): Predatory Pricing and Related Practices under Section 2 of the Sherman Act. Harvard Law Review Vol. 88., 1975. 637 733. Baumol, William J. (1996): Predation and the Logic of the Average Variable Cost Test. The Journal of Law and Economics, Vol. XXXIX (1). April 1996. 49 72. Grandy, Christopher (1993): Original Intent and the Sherman Antitrust Act: A Re Examination of the Consumer Welfare Hypothesis. Journal of Economic History. Posner, Richard A. (1970): A Statistical Study of Antitrust Enforcement. The Journal of Law and Economics, Vol. XIII., 1970. 365 419. Ad 4.:
6 Slay, B. (ed.) (1996): De monopolization and Competition Policy in Post Communist Economies. Westview Press, Boulder, CO. (see below for chapters) Capelik, V. Slay, B. (1996): Antimonopoly Policy and Monopoly Regulation in Russia. In: Slay, B. (1996) 3. chapter, 57 88. Ordover, J. A. Pittman, R. W. Clyde, P. (1996): Competition Policy for Natural Monopolies in a Developing Market Economy. In: Slay, B. (1996) 6. chapter 159 193. Slay, B. (1996): Industrial De Monopolization and Competition Policy in Poland. In: Slay, B. (1996) 5. chapter, 123 158. Slay, Ben (1996): Post Communist Competition Policy: Conclusions and Suggestions. In: Slay, B. (1996) 8. chapter, 229 238. Neven, Damien Papandropoulos, Pénélope Seabright, Paul (1998): Trawling for Minnows. European Competition Policy and Agreements Between Firms. CEPR, London, 1998. 227. Török, Ádám (1995): Industrial restructuring and marketization in Hungary: an assessment of trends and policies. In: Jackson, M. Biesbrouck, W. (eds.): Marketization, Restructuring and Competition in Transition Industries of Central and Eastern Europe, 3. chapter, 93 120. LICOS Studies on the Transitions in Central and Eastern Europe: Vol.3. LICOS Katholieke Universiteit Leuven Avebury. Török, Ádám (1996): Competition Policy and De monopolization in Hungary After 1990. In: Slay, B. (1996) 2. chapter 24 56. Kravtseniouk, Tatiana (2002): Merger Regulation in Central and Eastern Europe: Evidence from Hungary, Romania and Slovenia. Acta Oeconomica, Vol.52, Number 3, 2002. 327 346. Alley, Wilson A. (1997): Partial Ownership Arrangements and Collusion in the Automobile Industry. The Journal of Industrial Economics, Vol. XLV. June 1997. 191 205. Ad 6.: Scherer, F.M. (1996): Industry Structure, Strategy and Public Policy. HarperCollins CollegePublishers, New York, 1996. 436.
7 Laffont, Jean Jacques Tirole, Jean (1993): A Theory of Incentives in Procurement and Regulation. MIT Press, Cambridge, Mass., 1993. 705 + xxiii. (chapters to be read will be specified in class)