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Organisatorische Informationen Kursbeschreibung

eventdetails open Kursbeschreibung

Art der Prüfung (Englisch):
  • 40% written exam
  • 30% case study (individual)
  • 30% class participation
Kursinhalt (Englisch):
Economics does not teach us how to live: it helps us understand the world we live in. This course examines some aspects of firms that now produce most of what we consume. Why are large firms typical in some industries (e.g. automobiles, mining, steel making) while small firms abound in other industries (e.g. barbershops, bakeries)? Why are firms of different sizes even within an industry? Why do some firms make everything themselves (e.g. pharmaceuticals) while other firms design and sell items they neither make nor even assemble (e.g. Apple’s I-phone)? These are interesting questions that the course will help you answer.

Industrial Organisation (I-O) emerged as a specialized field primarily to enforce competition policy. Some European governments sought "national champions" but the U.S. sought to prevent monopolies and firms from colluding. Railways, electric utilities, radio broadcasters, airlines etc. were regulated since the late 1800s, and academic economists developed various theories to detect and remedy the resulting harm through regulations.

These regulations were assumed to work until a few skeptical economists found in the 1970s that regulated prices were higher, not lower. Regulations were worse than ineffective: they favoured the incumbent! As these surprising findings were replicated, the entire field changed: theory of regulatory capture showed how regulations are enacted and operate. Both information and incentive to act appropriately are often absent. The deregulation movement followed: airline and telecom deregulation have been hugely successful, but electricity deregulation in California was a disaster (we will examine why). After the 2008 financial crisis, the regulatory pendulum has since been swinging back, but effective regulation remains a challenge.

Literatur (Englisch):
Textbook & Readings:

What is a firm?

One classic I-O textbook is:

F. M. Scherer & David Ross (1990) Industrial Market Structure & Economic Performance 3rd edition Houghton Mifflin & Co. ISBN-13: 978-0395357149

But most economics textbooks cover the basic cost curves, and review these should suffice.

Articles that greatly influenced the field are generally in academic journals, and some remain interesting even decades later.

George Stigler The Citizen and the State (University of Chicago Press, 1975 ISBN 0-226-77429-5) is a collection of essays on regulation by a pioneer in the field who got a Nobel Prize in 1982.

Ronald Coase (1937) Nature of the Firm, Economica Vol 4, No.16

Cost of market transactions versus managerial direction within a firm.

Arman A. Alchian and Harold Demsetz (1972) Production, Information Costs & Economic Organisation, American Economic Review, Vol.62, No.5

Kumar, Rajan & Zingales (2001) "What Determines Firm Size?"

Size distribution of firms: Page 5 of 6

Monopoly & Anti-trust

These are long readings: interesting if you have the time, but skim otherwise.

The Federal Trade Commission (FTC) website has a good account of its history with references (not comprehensive) to other articles.

Edward Levi (1947) "The Anti-Trust Laws and Monopoly" The University of Chicago Law Review Vol.14 No.2 downloadable at:

Good survey of legal history, but presumes knowledge of US history, politics and legal structure.

This is a shorter piece:

Robert L Bradley Jr (1990) "On the Origins of the Sherman Act"

A widely cited recent article has a cogent criticism of the "Chicago School"

Lina M. Khan (2017) "Amazon’s Anti-Trust Paradox" Yale Law Journal, Vol. 126, No.3 January pp 564-907 downloadable at:

The GE-Honeywell merger: The EU case for discussion

HBS case: Competition Policy in the European Union #9-796-038

HBS case: Anti-trust Regulations in a Global Setting: The EU investigation of the GE/Honeywell Merger #9-204-081

Grant and Neven (2005) "The Attempted Merger between GE and Honeywell: A Case study of Transatlantic Conflict" (mimeo) at:

A Theory of Regulation

George Stigler (1971) "The Theory of Economic Regulation" The Bell Journal of Economics and Management Science Vol.2, No.1 pp 3-21

Data on political contributions:

The White House (2015) "Occupational Licensing: A Framework for Policymakers"

Airline Deregulation Page 6 of 6

John Howard Brown (2014) "Jimmy Carter, Alfred Kahn and Airline Deregulation" The Independent Review, Vol 19, No.1

Alfred E Kahn (1988) "Surprises of Airline Deregulation" American Economic Review, Vol.72, No2 pp 316-322

Alfred E Kahn (2001) "Whom the Gods would Destroy or How Not to Deregulate" AEI-Brookings Joint Centre for Regulatory Studies

Electricity Regulation & Deregulation

About how a CCG plant generates power

The Federal Energy Regulatory Commission Report (2005) to Congress on California Electricity crisis:

Paul L. Joskow (2008) "Lessons Learned from Electricity Market Liberalisation" The Energy Journal

Sweeney (2005) "Lessons for the Future" is an excellent account of what happened in California

Describes the German legal framework for electricity (in English)

HBS RWE and the Proposal for a German Electricity Regulator


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