DEPARTMENT OF ECONOMICS - University of Kent



UNIVERSITY OF KENT

Module Specification

1. Title:

Industrial Economics (EC547)

2. Level:

H (FHEQ Level: 6)

3. Units:

1 unit.

4. Pre-requisite and co-requisite units:

The pre-requisite units are either EC500 or EC528 (Business Economics). There are no co-requisites.

5. Target Intake, hours and contact hours:

The target intake is around 30-40 students. There will be 12 lectures and 6 seminars across the Michaelmas Term. In addition students will be expected to undertake approximately 8 hours of private study per week. The weekly workload is 10 hours. The total workload will be roughly 150 hours when we include half of the final 6 week examination term.

6. Rationale:

Aims:

• Provide a framework for explaining firm behaviour.

• Understand how firm behaviour affects welfare.

• Evaluate the suitability and effectiveness of some of the UK and European industrial policies.

Objectives: On completion of the module, students will:

• be able to explain how firms’ decisions regarding price, advertising and R&D, etc. can be modelled and evaluate the impact of those decisions on the structure and performance of markets

• be able to understand and apply the basic concepts of game theory to the analysis of firm’s strategic behaviour

• be able to understand the growth of firms through vertical integration and merger and the reasons why firms become multinational enterprises and the policy implications of this

• be able to identify the implications of the theory for the design and implementation of industrial policy and to evaluate critically the application of industrial policies in the UK and other countries

• be able to follow analysis of economic problems, construct their own economic arguments and offer critical comments on the arguments of the others

• be able to present economic arguments and ideas in seminars and essays

• be able to work in a group on economics seminar problems.

Relation of the proposed module to the School’s Degree Programmes:

This module is intended to be an optional component of the programme of single honours and joint degree programmes in Economics.

7. Organisation and Content:

A wide range of materials will be provided in the form of module handouts and electronic documents in the module folder on the public computing service. The module will build on the microeconomic theory introduced during second year. Topics covered will include:

• Monopoly behaviour. Why they exist and why they persist. Discriminating monopoly. Limits to monopoly power.

• Prisoner’s dilemma and the Nash equilibrium concept. Cournot, Bertrand and Stackelberg models of oligopoly. Cartel sustainability and credibility.

• The condition of entry. Sources of entry barriers. Limit Price Theory. Contestable markets. Fixed costs vs. sunk costs. Commitment and credibility. Strategic behaviour and entry.

• What do we mean by advertising? Optimal advertising expenditure. Determinants of advertising elasticities. Advertising and concentration. Is advertising pro or anti-competitive?

• The notion of product space. The address approach to product differentiation. Product differentiation and entry. Process innovation vs. product innovation. Innovation races. Patents and technological change. Market structure and incentives to innovate.

• What do we understand by concentration? Measurement and determinants. The market power vs. the efficiency debate.

• Different types of growth that firms may follow, e.g. internal, external and diversification. Reasons for firms becoming MNC.

• Which are the main UK and European industrial policies, and which are their objectives?

8. Teaching Methods and Core Skills:

The teaching of the module is organised around lectures and seminars. A weekly lecture will introduce and motivate the main topics of the module. It will also outline directions of further study using the recommended readings. The seminars provide the environment for students to understand complex concepts through group work and by raising individual questions in a supportive atmosphere. The seminars will also motivate students to apply the analytical skills to reality so that they can develop new ways of thinking critically; this will be done through group work and discussions. The essays will give students the opportunity to reflect in depth on a given topic and therefore, they will encourage the student’s learning process and help the student to develop critical views and research and written communication skills. Finally, the exam will develop the student’s individual problem solving ability.

9. Assessment and Examination Methods:

The final mark for this module is based upon a coursework essay (10% weight), one test (10% weight) and an examination (weight 80%). The essay will require the students to demonstrate the ability to undertake research and present a coherent and well-developed argument on a particular topic. The test will be based on the lectures and seminars material. Assessment will help to achieve all the objectives of the course, but in particular the final three objectives.

The examination is a two hour paper, in which students answer two from six essay questions. The exam will be designed to assess whether students have understood the key concepts of the module and are able to provide the main insights on a suggested topic in a coherent way, using the skills acquired in lectures, seminars and essay writing. Also, it will show students ability to apply micro-economic theory to the analysis of firms, markets and industries where competition is less than perfect. In so doing, the examination contributes to the development of the students skills and understanding of industrial economics. The hour long exam essay questions requires the students to write more advanced answers and in greater depth than is usually found in standard 45 minute exam essays.

10. Required and Recommended Reading:

The main texts which will be used are:

Pepall, L., Richards, D.J. and Norman G. Industrial Organization: Contemporary Theory & Practice, 3rd Edition, (South-Western, 2005).

Carlton, D. and Perloff, J. Modern Industrial Organisation 4th Edition, (Addison-Wesley, 2005).

Tirole, J. The Theory of Industrial Organization, 9th Edition , (MIT Press, 1997).

Shy, Oz. Industrial Economics: Theory and Applications, (MIT Press, 1996).

Martin S. Industrial Organization: A European Perspective, (Oxford University Press, 2001).

Church, J. and Ware R. Industrial Organization: A Strategic Approach, (McGraw-Hill, 2000).

Motta, M. Competition policy: Theory and Practice, (Cambridge University Press, 2005).

11. Student Feedback:

Through a module evaluation form, the Consultative Committee and informal feedback. The evidence and resulting decisions will be reported back to students through the Consultative Committee after discussion at the Economics Teaching Committee and School Meetings.

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