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Econ XYZ Competition Policy and Market Structure

(4 units)
Autumn 2009-10

Instructor: Adeel Faheem


Office: Room 107, Department of Economics
E-mail: adeel.faheem@lums.edu.pk
Office Hours : Tuesday and Thursday 3 :00-4 :30 pm

Description:
This course aims to give students an introduction to the competition
policy under diverse market structure. The debate on competition
policy revolves around defining the relevant market and measuring
the market power. We will learn necessary tools to gauge market
power. We shall also use extremely simple economics concepts and
economic models to analyze important competition policy issues
such as collusion, mergers, and abusive dominant (exclusionary)
practices. The material we are going to deal with makes use of
elementary game theory and microeconomics concepts. The review
of historical anti-trust cases filed both in the US and Europe will give
a practical perspective on competition policy issues.

Course Objectives:
The objective of the course is to make the students aware of the
basic concepts and literature on competition policy. The course also
seeks to lay essential foundations for those who want to pursue
graduate studies in Industrial Organization.

Prerequisites:
Microeconomics II

Evaluation:
Quizzes 10% (two announced quizzes)
Midterm 30%
Final Exam 40%
Assignments 10%
Research Paper 10% (A group of three students will be
assigned a research topic to write a
critical review of at least three research
articles.)
Required Text:
Motta, Massimo (2004). Competition Policy: Theory and Practice.
Cambridge University Press, USA. (MM)

Church, Jeffrey and Roger Ware (2000). Industrial Organization: A Strategic


Approach. The McGraw-Hill Companies, Inc. (CW)

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Elhauge, Einer and Damien Geradin (2007). Global Competition Law
and Economics. Hart Publishing. GCLE

Shy, Oz (2004). The Economics of Network Industries. Cambridge


University Press. (OS)

Rochet, Jean Charles and Jean Tirole (2001). Platform Competition in


Two-Sided Markets, Journal of European Economic Association, Vol.
4(1), 990-1029.

Lectures and Examinations:


• There will be 28 lectures of 100 minutes each.

Course Contents:

Module 1: Introduction to Basic concepts of Market power,


market definition, and competition policy
Competition Policy definition; Competition Policy vs. Regulation; The
history of competition policy in the European Union and the United
States; Competition Policy in Pakistan (optional); The objective of
competition policy. Market Power and economic efficiency: X-inefficiencies;
Number of firms, market share and Market power. Market definition: The relevant
market definition and the SSNIP test; the substitutability on the supply side.

Case Studies: A case of US vs. Du Pont

Module 2: Horizontal agreements and Mergers


What is collusion? Tacit collusion and explicit collusion; the determinants of tacit
collusion; Cases and leniency program for explicit collusion. The particular case of
Mergers: The actual procedure in the European Union and its reform; Efficiency vs.
market and coordinated effects;

Case Studies: A case of Parallel Behavior: Wood pulp


Case Studies: A case of Nestle/Perrier and ABB/Daimler-Benz

Module 3: Vertical agreements and Mergers


What are the vertical restraints? Intra-Brand Competition: Resale price maintenance
(RPM); Inter-Brand competition: Exclusive territories; Vertical integration,

Case Studies: A case of General Electric/Honeywell


Case Studies: A case of Ice Cream Market in Germany

Module 4: Market power and abuse of dominant position


Predation: Recent theories of Predatory Pricing; Practice how to deal with Predatory
Models of Pricing. Discrimination and Welfare effects of Price Discrimination. Non-

2
price Monopolization practices Bundling. Special topics: Competition issues in
Network Industries and Two-sided markets

Case Studies: A case study of US vs. Microsoft

Session Number Topics Chapters Covered


Module 1
1-2 Competition Policy MM Ch. 1/CW See
definition Appendix A, GCLE Ch. 1
3-4 Market Power and MM Ch. 2/CW Ch. 19,
economic efficiency GCLE Ch. 3
5-6 Market Definition MM Ch. 3/CW Ch. 19
Module 2
7-8 Horizontal agreements MM Ch. 4 GCLE Ch. 2
9 Tacit and explicit MM Ch. 4
collusions
10-12 Horizontal mergers MM Ch. 5/CW Ch. 23,
GCLE Ch. 7 (A)
Module 3
13- 14 Vertical agreements MM. Ch. 6/ CW Ch. 22
15 Mid-term examination
(tentative)
16-17 Vertical mergers MM. Ch. 6, GCLE Ch. 4

GCLE Ch. 7 (B)


Module 4
18-19 Price and non-price MM. Ch. 7/CW Ch. 21
monopolization practices
20-21 Predatory Pricing and MM. Ch. 7/CW Ch. 5
Price Discrimination
22-23 Bundling and Tying MM. Ch. 7
24-28 Special topics: OS Ch. 7 and Ch.
Competition Network 9/Rochet and Tirole
Industries and Two sided (2001)
markets