The University of Connecticut
Economics 381
Industrial Organization
Fall 1997
TTh 11-12:30
HRM 311
R. N. Langlois

Interactive Syllabus and Reading List
(Draft 1.02)

About the course.

This course is part of the graduate sequence in Industrial Organization (IO). It focuses on IO theory. This is in contrast to Economics 382, offered in the spring, which deals with policy issues, especially antitrust and government regulation. (Obviously, it is difficult to separate theory and policy, so there will be some overlap.) It is also in contrast to Ron Cotterill’s ARE 358, which concentrates on empirical work in industrial organization. (By empirical is here meant primarily econometric; there is also, however, a long tradition of case-study work in IO, which is also "empirical." Cotterill’s course also offers a perspective on the nature of IO and the role of antitrust that is somewhat different from my own.) Moreover, the subject matter of this course arguably also stands in contrast to the theory of how industries (firms and markets) are actually organized, admittedly an odd comment on a course called Industrial Organization. If you want to learn about the economics of organization, you have to take Economics 386, which will probably be offered again next academic year.

So what, then, is the course about? In the higher reaches of the profession, IO is now a branch of applied game theory, as reflected, for example, in a textbook like Jean Tirole, The Theory of Industrial Organization (Cambridge: MIT Press, 1988, on reserve). This bit of imperialism by game theory used to be called "the New Industrial Organization," although it’s not so new anymore. By contrast, this course will take a far broader and more eclectic approach, conceiving of IO as organized around a series of intellectual debates over the nature of competition and the behavior and regulation of firms. (No textbook captures very much of what I want to cover, but you may at times want to consult — and, if you’re serious about IO, to own — F. M. Scherer and David Ross, Industrial Market Structure and Economic Performance (Boston: Houghton-Mifflin, 1990, on reserve), which used to be considered the "bible" of IO.) My goal will be to develop critical perspectives throughout and to present a number of alternative approaches. Nonetheless, I consider it important to expose you to the mainstream; and to that end I have asked the bookstore to order a few copies of Oz Shy, Industrial Organization: Theory and Applications (Cambridge: MIT Press, 1996), which is more accessible than Tirole.

N. B. Journal articles not on reserve can normally be found either in Room 339 or in the third-floor stacks of the library. Please reshelve journals promptly so others have access.

There are links below to the full text of a number of the articles. Articles in the American Economic Review, Journal of Political Economy, Journal of Economic Literature, and Journal of Economic Perspectives, and the Quarterly Journal of Economics more than five years old are available online at JStor.

Course requirements.

There will be a take-home midterm and a take-home final. The final will count somewhat more than the midterm and will be comprehensive.

Sequence of topics.

Historical introduction and overview.


The meaning of competition.

The welfare economics of "monopoly power."

Cournot, concentration, and collusion.

Barriers to entry.

Credible threats, credible commitments.

Raising rivals’ costs.

Potential competition.

Strategy and mobility barriers.

Differentiated products and advertising.

"Monopolistic competition."

Product differentiation.


Innovation and technological change.

Learning and costs.

Predatory pricing and learning curves.

Increasing returns, lock-in, and standards.


Standards and standard-setting.

Evolutionary/process theories.