Empirical Industrial Organization

Objective

The aim of the course is to give a solid grounding in the modern empirical tools that are useful in understanding the structure of markets, and the strategic behavior of firms and their consumers.The course covers discrete choice and static demand estimation, consumer search, and static models of entry and market structure. The course also provides a hands-on introduction to MATLAB, with applications to the estimation of static demand systems and entry models.

Grading

Students are expected to prepare for and actively participate in all lectures and computer sessions.The grade for this course is based on presentations of assigned papers (20%), (computational) problem sets (30%) and a final home assignment (50%).

a) Presentations: Lecture material will be mainly based on those references with [*] (see below the list of topics and references). For each topic, students will make a 30–minute presentation about a randomly assigned paper related to the topic previously discussed in class.

b) Problem Sets: There will be 2 problem sets. They will entail substantial empirical and computational exercises. Students can work in groups but each student should send an individual code. Randomly selected students will be asked to discuss their problem sets’ solutions during class (i.e., codes and results).

Planning

Meeting 1:

- Topic 1: Introduction to Structural Econometrics in IO

- Topic 2 (part 1): Static Demand Estimation

- Assignment of papers for presentations

Meeting 2:

- Topic 2 (part2): Static Demand Estimation

Meeting 3:

- Topic 2 (part3): Static Demand Estimation / Presentations

- Assignment of Problem Set 1

Meeting 4:

- Topic 3 (part 1): Static models of entry and market structure

Meeting 5:

- Topic 3 (part2): Static models of entry and market structure

Meeting 6:

- Topic 3 (part3): Static models of entry and market structure / Presentations

- Assignment of Problem Set 2

Meeting 7:

- Topic 4 (part 1): Demand and search

Meeting 8:

- Topic 4 (part 3): Demand and search / Presentations

- Assignment Take Home Exam

References

Introduction to Empirical IO

- Ackerberg, Daniel, C. Lanier Benkard, Steven T. Berry, and Ariel Pakes. 2007. ‘‘Econometric Tools for Analyzing Market Outcomes." Handbook of Econometrics, 6, 4171-4276.

- Reiss, Peter C. and Frank A. Wolak. 2007. ‘‘Structural Econometric Modeling: Rationales and Examples from Industrial Organization." Handbook of Econometrics, 6, 2007, 4277–4314.

- Aguirregabiria, Victor. 2021. ‘‘Empirical Industrial Organization: Models, Methods, and Applications." Book in progress.

- Verboven, Frank. 2012. ‘‘Empirical Industrial Organization and Competition Policy." Book in progress.

Static demand estimation

- Berry, Steven T. 1994. ‘‘Estimating Discrete-Choice Models of Product Differentiation." RAND Journal of Economics, 25(2), pp. 242-262.

- Berry, Steven T., James Levinsohn, and Ariel Pakes. 1995. ‘‘Automobile Prices in Market Equilibrium." Econometrica, 63, pp. 841–990.

- Berry, Steven T., James Levinsohn, and Ariel Pakes. 2004. ‘‘Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market." Journal of Political Economy, 112, pp. 68–105.

- Berry, Steven T. and Philip Haile. 2021. ‘‘Foundations of Demand Estimation." Handbook of Industrial Organization, 4(1), pp. 1-62. Elsevier.

- Train, Kenneth. 2009. ‘‘Discrete Choice Methods with Simulation." Cambridge University Press.

Market Power and Firm Conduct

- Bresnahan, Timothy F. 1982. ‘‘The Oligopoly Solution Concept Is Identified." Economics Letters, 10(1-2), 87-92.

- Gandhi, Amit, and Aviv Nevo. 2021. ‘‘Empirical Models of Demand and Supply in Differentiated Products Industries." Handbook of Industrial Organization, 4(1), pp. 63-139. Elsevier. 

- Nevo, Aviv. 1998. ‘‘Identification of the Oligopoly Solution Concept in a Differentiated-Products Industry." Economics Letters, 59(3), 391-395.

- Nevo, Aviv. 2001. ‘‘Measuring Market Power in the Ready-to-Eat Cereal Industry." Econometrica, 69(2), 307–342.

Horizontal Mergers

- Angrist, Joshua D., and Jörn-Steffen Pischke. 2010. ‘‘The Credibility Revolution in Empirical Economics: How Better Research Design Is Taking The Con Out Of Econometrics.'' Journal of Economic Perspectives, 24(2), 3-30.

- Asker, John, and Volker Nocke. 2021. ‘‘Collusion, Mergers, and Related Antitrust Issues.'' Handbook of Industrial Organization, 5(1), pp. 177-279. Elsevier.

- Björnerstedt, Jonas, and Frank Verboven. 2016. ‘‘Does Merger Simulation Work? Evidence from the Swedish Analgesics Market.'' American Economic Journal: Applied Economics, 8(3), 125-164.

- Miller, Nathan H., and Weinberg, Matthew C. 2017. ‘‘Understanding the Price Effects of the MillerCoors Joint Venture.'' Econometrica, 85(6), 1763-1791.

- Nevo, A., & Whinston, M. D. (2010). ‘‘Taking the Dogma Out of Econometrics: Structural Modeling and Credible Inference.'' Journal of Economic Perspectives, 24(2), 69-82.

Vertical Relations

- Lee, Robin S., Michael D. Whinston, and Ali Yurukoglu. 2021. ‘‘Structural Empirical Analysis of Contracting in Vertical Markets." Handbook of Industrial Organization, 4(1), pp. 673-742. Elsevier.

- Villas-Boas, Sofia Berto. 2007. ‘‘Vertical Relationships Between Manufacturers and Retailers: Inference with Limited Data." Review of Economic Studies, 74(2), 625-652.