Industrial Organization studies the decision making of the firm in a variety of market structures, with particular emphasis on markets in which firms possess some market power. Many of the restrictive assumptions imposed in models of perfect competition are relaxed. The course explores the strategic decision making of firms regarding: market entry and exit, choice of plant size/capacity, the decision to be a multi-product firm, product versioning, and vertical integration. Game-theoretic models are introduced and applied to firm decisions regarding entry, pricing, advertising, and responses to government regulation. The role of imperfect and asymmetric information in firm interactions, from bargaining games to strategic entry deterrence to uses of warranties and prices as a signal of quality, is stressed throughout. Finally, the course analyzes government regulation of markets, including information provision, product regulation, and antitrust policy.
