The Theory of Industrial Organization / Edition 1

by Jean Tirole

Overview

The Theory of Industrial Organization is the first primary text to treat the new industrial organization at the advanced-undergraduate and graduate level. Rigorously analytical and filled with exercises coded to indicate level of difficulty, it provides a unified and modern treatment of the field with accessible models that are simplified to highlight robust economic ideas while working at an intuitive level. To aid students at different levels, each chapter is divided into a main text and supplementary section containing more advanced material. Each chapter opens with elementary models and builds on this base to incorporate current research in a coherent synthesis. Tirole begins with a background discussion of the theory of the firm.

In Part I he develops the modern theory of monopoly, addressing single product and multi product pricing, static and intertemporal price discrimination, quality choice, reputation, and vertical restraints. In Part II, Tirole takes up strategic interaction between firms, starting with a novel treatment of the Bertrand-Cournot interdependent pricing problem. He studies how capacity constraints, repeated interaction, product positioning, advertising, and asymmetric information affect competition or tacit collusion. He then develops topics having to do with long term competition, including barriers to entry, contestability, exit, and research and development. He concludes with a "game theory user's manual" and a section of review exercises.

Important Notice: The digital edition of this book is missing some of the images found in the physical edition.

Product Details

ISBN-13:	9780262200714
Publisher:	MIT Press
Publication date:	08/26/1988
Series:	The MIT Press
Edition description:	New Edition
Pages:	496
Sales rank:	223,688
Product dimensions:	8.85(w) x 10.26(h) x 1.35(d)
Age Range:	18 Years

About the Author

Jean Tirole, the 2014 Nobel Laureate in Economics, is Scientific Director of IDEI (Institut d'Economie Industrielle), Chairman of the Board of TSE (Toulouse School of Economics), and Annual Visiting Professor of Economics at MIT.

Table of Contents

Preface
Introduction
The Theory of the Firm
1 What Is a Firm?
2 The ProfitMaXimization Hypothesis
3 Supplementary Section: The PrincipalAgent Relationship
Answers and Hints
References
I The EXercise of Monopoly Power
1 Monopoly
1.1 Pricing Behavior
1.2 Cost Distortions
1.3 RentSeeking Behavior
1.4 Concluding Remarks
1.5 Supplementary Section: Durable Goods and Limits on Monopoly
Power
Answers and Hints
AppendiX: A Heuristic Proof of the Coase Conjecture
References
2 Product Selection, Quality, and Advertising
2.1 The Notion of Product Space
2.2 Product Selection
2.3 Quality and Information
2.4 Advertising
2.5 Concluding Remarks
2.6 Supplementary Section: Repeat Purchases
Answers and Hints
References
3 Price Discrimination
3.1 Perfect Price Discrimination
3.2 Multimarket (ThirdDegree) Price Discrimination
3.3 Personal Arbitrage and Screening (SecondDegree Price
Discrimination)
3.4 Concluding Remarks
3.5 Supplementary Section: Nonlinear Pricing
Answers and Hints
References
4 Vertical Control
4.1 Linear Prices versus Vertical Restraints
4.2 EXternalities and Vertical Control
4.3 Intrabrand Competition
4.4 Interbrand Competition
4.5 Concluding Remarks
4.6 Supplementary Section: CompetitionReducing Restraints
Answers and Hints
References
II Strategic Interaction
5 ShortRun Price Competition
5.1 The Bertrand ParadoX
5.2 Solutions to the Bertrand ParadoX: An Introduction
5.3 Decreasing Returns to Scale and Capacity Constraints
5.4 Traditional Cournot Analysis
5.5 Concentration Indices and Industry Profitability
5.6 Concluding Remarks
Answersand Hints
References
6 Dynamic Price Competition and Tacit Collusion
6.1 Conventional Wisdom (Factors Facilitating and Hindering
Collusion)
6.2 Static Approaches to Dynamic Price Competition
6.3 Supergames
6.4 Price Rigidities
6.5 Reputation for Friendly Behavior
6.6 Concluding Remarks
6.7 Supplementary Section: Dynamic Games and Tacit Collusion
Answers and Hints
References
7 Product Differentiation: Price Competition and
NonPrice Competition
7.1 Spatial Competition
7.2 Monopolistic Competition
7.3 Advertising and Informational Product Differentiation
7.4 Concluding Remarks
7.5 Supplementary Section: Vertical Differentiation and
Monopolistic Competition
Answers and Hints
References
8 Entry, Accomodation, and EXit
8.1 FiXed Costs: Natural Monopoly and Contestability
8.2 Sunk Costs and Barriers to Entry: The StackelbergSpenceDiXit
Model
8.3 A TaXonomy of Business Strategies
8.4 Applications of the TaXonomy
8.5 Epilogue: Prices versus Quantities
8.6 Supplementary Section: Strategic Behavior and Barriers to
Entry or Mobility
Answers and Hints
References
9 Information and Strategic Behavior: Reputation, Limit
Pricing, and Predation
9.1 Static Competition under Asymmetric Information
9.2 Dynamics: A Heuristic Approach
9.3 Accommodation and Tacit Collusion
9.4 The MilgromRoberts Model of Limit Pricing
9.5 Predation for Merger
9.6 Multimarket Reputation
9.7 The "Long Purse" Story
9.8 Concluding Remarks
9.9 Supplementary Section: Darwinian Selection in an Industry
Answers and Hints
References
10 Research and Development and the Adoption of New
Technologies
10.1 Incentives as a Function of the Market Structure: The Value
of Innovation
10.2 Introduction to Patent Races
10.3 Welfare Analysis of Patent Races
10.4 Alternative Inducements to R&D
10.5 Strategic Adoption of New Technologies
10.6 Network EXternalities, Standardization, and Compatibility
10.7 Concluding Remarks
10.8 Supplementary Section: Patent Licensing and Research Joint
Ventures
Answers and Hints
References
11 Noncooperative Game Theory: A User's Manual
11.1 Games and Strategies
11.2 Nash Equilibrium
11.3 Perfect Equilibrium
11.4 Bayesian Equilibrium
11.5 Perfect Bayesian Equilibrium
11.6 Supplementary Section
Answers and Hints
References
Review EXercises
IndeX

What People are Saying About This

John P. Bonin

I think that this book will fill a tremendous void in the textbook market for advanced undergraduate and graduate level courses in industrial organization and applied microeconomics. The strength of Tirole's work is his masterful synthesis of analytical development and intuitive discussion. Consequently, he makes understandable to the reader some very advanced research. This synthesis will prove invaluable to graduate students who are looking for a research niche of their own.

Endorsement

I think that this book will fill a tremendous void in the textbook market for advanced undergraduate and graduate level courses in industrial organization and applied microeconomics. The strength of Tirole's work is his masterful synthesis of analytical development and intuitive discussion. Consequently, he makes understandable to the reader some very advanced research. This synthesis will prove invaluable to graduate students who are looking for a research niche of their own.

—John P. Bonin, Professor of Economics, Wesleyan University

From the Publisher

I think that this book will fill a tremendous void in the textbook market for advanced undergraduate and graduate level courses in industrial organization and applied microeconomics. The strength of Tirole's work is his masterful synthesis of analytical development and intuitive discussion. Consequently, he makes understandable to the reader some very advanced research. This synthesis will prove invaluable to graduate students who are looking for a research niche of their own.

—John P. Bonin, Professor of Economics, Wesleyan University