Introduction to Industrial Organization, second edition / Edition 2

by Luis M. B. Cabral

Overview

An issue-driven introduction to industrial organization, thoroughly updated and revised.

The study of industrial organization (IO)—the analysis of the way firms compete with one another—has become a key component of economics and of such related disciplines as finance, strategy, and marketing. This book provides an issue-driven introduction to industrial organization. Although formal in its approach, it is written in a way that requires only basic mathematical training. It includes a vast array of examples, from both within and outside the United States. This second edition has been thoroughly updated and revised.

In addition to updated examples, this edition presents a more systematic treatment of public policy implications. It features added advanced sections, with analytical treatment of ideas previously presented verbally; and exercises, which allow for a deeper and more formal understanding of each topic. The new edition also includes an introduction to such empirical methods as demand estimation and equilibrium identification. Supplemental material is available online.

Product Details

ISBN-13:	9780262035941
Publisher:	MIT Press
Publication date:	03/03/2017
Series:	The MIT Press
Edition description:	second edition
Pages:	440
Sales rank:	723,157
Product dimensions:	8.10(w) x 9.30(h) x 1.00(d)
Age Range:	18 Years

About the Author

Luís M. B. Cabral is Paganelli-Bull Professor of Economics and International Business and Chair of the Department of Economics at the Leonard N. Stern School of Business at New York University.

Table of Contents

Preface ix

Acknowledgments x

Chapter 1 What is Industrial Organization? 1

1.1 An example 2

1.2 Central questions 3

1.3 Coming next… 9

Part 1 $$$

Chapter 2 Consumers 15

2.1 Consumer preferences and demand 15

2.2 Demand elasticity 19

2.3 Estimating the demand curve 26

2.4 Are consumers really rational? 29

Chapter 3 Firms 35

3.1 The firm's production, cost, and supply functions 36

3.2 Pricing 43

3.3 Do firms maximize profits? 52

3.4 What determines a firm's boundaries? 54

3.5 Why are firms different? 56

Chapter 4 Competition, Equilibrium, and Efficiency 67

4.1 Perfect competition 67

4.2 Competitive selection 74

4.3 Monopolistic competition 79

4.4 Efficiency 81

Chapter 5 Market Failure and Public Policy 93

5.1 Externalities and market failure 93

5.2 Imperfect information 99

5.3 Monopoly 102

5.4 Regulation 107

5.5 Competition policy and antitrust 109

5.6 Firm regulation 110

Chapter 6 Price Discrimination 121

6.1 Selection by indicators 125

6.2 Self selection 130

6.3 Non-linear pricing 135

6.4 Auctions and negotiations 140

6.5 Is price discrimination legal? Should it be? 144

Part 2 $$$

Chapter 7 Games and Strategies 159

7.1 Nash equilibrium 161

7.2 Sequential games 167

7.3 Repeated games 172

7.4 Information 174

Chapter 8 Oligopoly 185

8.1 The Bertrand model 186

8.2 The Cournot model 194

8.3 Bertrand vs. Cournot 200

8.4 The models at work: comparative statics 202

Chapter 9 Collusion and Price Wars 217

9.1 Stability of collusive agreements 218

9.2 Price wars 222

9.3 Factors that facilitate collusion 227

9.4 Empirical analysis of cartels and collusion 232

9.5 Public policy 234

Part 3 $$$

Chapter 10 Market Structure 251

10.1 Entry costs and market structure 253

10.2 Endogenous vs. exogenous entry costs 260

10.3 Intensity of competition, market structure, and market power 264

10.4 Entry and welfare 269

10.5 Entry regulation 273

Chapter 11 Horizontal Mergers 281

11.1 Economic effects of horizontal mergers 282

11.2 Horizontal merger dynamics 288

11.3 Horizontal merger policy 292

Chapter 12 Market Foreclosure 303

12.1 Entry deterrence 304

12.2 Exclusive contracts, bundling, and foreclosure 312

12.3 Predatory pricing 317

12.4 Public policy towards foreclosure 320

Part 4 $$$

Chapter 13 Vertical Relations 333

13.1 Vertical integration 334

13.2 Vertical restraints 340

13.3 Public policy 342

Chapter 14 Product Differentiation 349

14.1 Demand for differentiated products 350

14.2 Competition with differentiated products 354

14.3 Advertising and branding 362

14.4 Consumer behavior and firm strategy 368

14.5 Public policy 371

Chapter 15 Innovation 377

15.1 Market structure and innovation incentives 381

15.2 Diffusion of knowledge and innovations 383

15.3 Innovation strategy 385

15.4 Public policy 391

Chapter 16 Networks 399

16.1 Chicken and egg 401

16.2 Innovation adoption with network effects 405

16.3 Firm strategy 414

16.4 Public policy 419

Index 427

What People are Saying About This

Carl Shapiro

Cabral's Introduction to Industrial Organization is clear, precise, relevant, even fun. This delightful volume is your best choice for crisp and accessible coverage of IO theory. The second edition sparkles just like the first.

Michael Waterson

This book seems destined to become a leading text in the field. It contains extremely good motivating examples from several countries, and is the first book successfully to incorporate a modern discussion of the determinants of market structure. I intend to adopt it.

Matthew Gentzkow

Introduction to Industrial Organization is a rare commodity: an intellectually rigorous textbook that is elegant, concise, and a pleasure to read. Cabral manages to communicate difficult ideas precisely while keeping the focus squarely on issues that matter for the real world. It is the ideal introduction for undergraduates, MBA students, or anyone else looking for a non-technical overview of the field.

Ali Hortacsu

This is a wonderful textbook: concise, precise, and full of up-to-date examples. If you are looking for an intuitive treatment of industrial organization that is rigorous and yet doesn't bog you down in excessive detail, this is a great choice.

Michael H. Riordan

Cabral introduces the theoretical ideas and frameworks of contemporary IO expertly, succinctly, and with flair. Motivating examples and stylized facts bring the theories alive. The new edition of Introduction to Industrial Organization updates and improves the organization of the first, while keeping its expository charms.

Endorsement

Cabral's Introduction to Industrial Organization is clear, precise, relevant, even fun. This delightful volume is your best choice for crisp and accessible coverage of I.O. theory.

—Carl Shapiro, Transamerica Professor of Business Strategy, Haas School of Business, University of California at Berkeley

Paul Klemperer

Industrial organization has needed a book like this. This articulate exposition of the subject by Luis Cabral, who has himself made many important contributions to the field, will be invaluable to all students of industrial organization.

Pierre Regibeau

This is destined to be a leading text both for traditional courses in industrial organization and for courses on the economics of management strategy. It is rigorous without being intimidating and clear without being superficial.

From the Publisher

Luis Cabral has updated his industrial organization textbook. The revision retains the strengths of the original: it is clear and succinct, with an emphasis on how the field addresses important applications. The many new examples ensure the relevance of the material.

—Robert Porter, William R. Kenan Jr. Professor of Economics, Northwestern University; coeditor of Handbook of Industrial Organization

Introduction to Industrial Organization is a rare commodity: an intellectually rigorous textbook that is elegant, concise, and a pleasure to read. Cabral manages to communicate difficult ideas precisely while keeping the focus squarely on issues that matter for the real world. It is the ideal introduction for undergraduates, MBA students, or anyone else looking for a non-technical overview of the field.

—Matthew Gentzkow, Professor of Economics, Stanford University

Cabral's Introduction to Industrial Organization is clear, precise, relevant, even fun. This delightful volume is your best choice for crisp and accessible coverage of IO theory. The second edition sparkles just like the first.

—Carl Shapiro, Transamerica Professor of Business Strategy, Haas School of Business, University of California at Berkeley

This is a wonderful textbook: concise, precise, and full of up-to-date examples. If you are looking for an intuitive treatment of industrial organization that is rigorous and yet doesn't bog you down in excessive detail, this is a great choice.

—Ali Hortacsu, Ralph and Mary Otis Isham Professor of Economics, University of Chicago

Luis Cabral's book covers all the basic topics in Industrial Organization in an easily accessible way. It is a perfect exposition for an undergraduate class or for a professional who wants to become acquainted with the topics IO deals with and why they are important. He has done the field a great service.

—Ariel Pakes, Thomas Professor of Economics, Harvard University; editor, Microeconomic Insights

Cabral introduces the theoretical ideas and frameworks of contemporary IO expertly, succinctly, and with flair. Motivating examples and stylized facts bring the theories alive. The new edition of Introduction to Industrial Organization updates and improves the organization of the first, while keeping its expository charms.

—Michael H. Riordan, Laurans A. Arlene Mendelson Professor of Economics, Columbia University

Ariel Pakes

Luis Cabral's book covers all the basic topics in Industrial Organization in an easily accessible way. It is a perfect exposition for an undergraduate class or for a professionalwho wants to become acquainted with the topics IO deals with and why they are important. He has done the field a great service.

Robert Porter

Luis Cabral has updated his industrial organization textbook. The revision retains the strengths of the original: it is clear and succinct, with an emphasis on how the field addresses important applications. The many new examples ensure the relevance of the material.