Econ. 762
Empirical Industrial Organization
Spring 2006
Juan Esteban Carranza (juanes@ssc.wisc.edu)
Office SS6428
Description of the course:
This is a course on empirical methods for studying specific markets; there is an emphasis in structural techniques or what has been called “New Empirical Industrial Organization”, in contrast with the “old” empirical IO literature, which was mainly descriptive. As will become aparent throughout the course, the applicability of much of the techniques to be studied goes beyond the field of Industrial Organization to Labor or Trade or Public economics.
The first 10/12 weeks (the “core”) will have a very strong methodological focus. The last weeks of the semester will be devoted to study specific topics. Students will be in charge of much of these last sessions, as explained below.
Evaluation:
There will be two problems sets (after topics 4 and 7) that will give you the opportunity to apply the studied empirical techniques. Additionally, each student will be responsible of conducting an intensive literature review of one selected topic –a small survey. By around the tenth week of the semester, a complete preliminary draft has to be handed. Students will be required to make a presentation on the chosen topic in the last weeks of the course. A list of possible topics will be provided later on the semester; students may also suggest their own topic by consulting with me.
Sometimes students may be required to write a report on a paper presented in the IO workshop, which should be attended regularly.
Outline of the “core” course and minimal references (includes the literature that is more or less covered in class; if interested in additional references, please consult me; an asterisc indicates required readings):
1. Introduction and motivation of the field. The classic empirical model of market equilibrium
H. Simon and C. Bonini (1958), “The size distribution of business firms”, AER
D. Ravenscraft (1983), “Structure-profit relationships at the line of business and industry level”, REStud
J. Rosse (1970), “Estimating cost function parameters without using cost data: illustrated methodology”, Econometrica
3. Classic oligopoly models:
T. Bresnahan (1982), “The oligopolistic solution concept is identified”, Economic Letters
*T. Bresnahan (1989), “Empirical tudies of industries with market power”, Handbook of IO, vol II
L. Lau (1982) “On identifying the degree of competitiveness from industry price and output data”, Economic Letters
*R. Porter (1983), “A study of cartel stability: the Joint Executive Committee, 1880-1886”, RAND
*C. Wolfram (1999), “Measuring duopoly power in the british electricity market”, RAND
*D. Genesove and W. Mullin (1998), “Testing static oligopoly models: conduct and cost in sugar industry, 1890-1914”
4. Differentiated products:
*J. Hausman (1995), “Valuation of new goods under perfect and imperfect competition”, NBER wp 4970
*Berry (1994), “Estimating discrete choice models of product differentiation”, RAND
*T. Bresnahan (1987), “Competition and collusion in the American automobile industry: the 1955 price war”, J. of Industrial Economics
*Berry, Levinsohn and Pakes (1995), “Automobile prices in market equilibrium”, Econometrica
*Berry, Levinsohn and Pakes (2004), “Differentiated products demand systems from a combination of micro and macro data”, JPE
*Goldberg P. (1995), “Product differentiation and oligopoly in international markets: the case of the U.S. automobile industry”, Econometrica
A. Nevo (2001), “Measuring market power in the ready-to-eat cereal industry”, Econometrica
A. Goolsbee and A. Petrin (2004), “The consumer gains from direct broadcast satellites and the competition with cable TV”, Econometrica
I. Hendel (1999), “Estimating multiple discrete choice models: sn spplicstion to computerization returns”
F. Wolak (1996), “The welfare impacts of competitive telecommunications supply: a household level analysis”, Brookings Papers on Economic Activity
5. Production function analysis:
*Z. Grilliches and J. Mairesse (1995), “Production functions: the search for identification”, NBER wp 5067
*S. Olley and A. Pakes (1996), “The dynamics of productivity in the telecommunications equipment industry”, Econometrica
*J. Levinsohn and A. Petrin (2003) “Estimating production functions using inputs to control for unobservables”, REStud
D. Ackelberg and K. Caves (2003), “Structural estimation of production functions”, manuscript
6. Entry models:
T. Bresnahan and P. Reiss (1988), “Do entry conditions vary across markets?”, Brookings Papers on Economic Activity
T. Bresnahan and P. Reiss (1990), “Entry in monopoly markets”, REStud
*T. Bresnahan and P. Reiss (1991) “Entry and competition in concentrated markets”, JPE
Berry and Waldfogel (1999), “Free entry and social inefficiency in radio broadcasting”, RAND
*S. Berry (1992), “Estimation of a model of entry in the airline industry”, Econometrica
*M. Mazzeo (2002), “Product differentiation and oligopoly market structure: an empirical analysis of the motel industry”, RAND
*K. Seim (2002), “An empirical model of firm entry with endogenous product-type choices”, manuscript
7. Dynamic behavior and dynamic oligopoly:
*R. Pindyck and J. Rotemberg (1983), “Dynamic factor demands and the effects of the energy price shocks”, AER
*J. Rust (1987), “Optimal replacement of GMC bus engines: an empirical model of Harold Zurcher”, Econometrica
*A. Pakes (1986), “Patents as options: some estimates of the value of holding european patent stocks”, Econometrica
*V. Aguirregabiria (1999) “The dynamics of markups and inventories in retailing firms” ReStud.
8. Semiparametric estimation of games.
*S. Berry and Pakes (2004), “Estimation from the first order conditions for dynamic controls”, manuscript
*V. Aguirregabiria and P. Mira (2005), “Sequential estimation of dynamic discrete games with multiple equilibria”, manuscript (forthcoming in Econometrica)
M. Pesendorfer and P. Schmidt-Dengler (2003), “Identification and estimation of dynamic games”, NBER wp9726
*Li, Perrigne and Vuong (2002), “Structural estimation of the affiliated private value model”, RAND
Additional topics (this list may expand or contract depending on demand and other constraints):
Auctions; Non-parametrics; Non-linear pricing; Entry/Deterrence; durable goods; dynamic supply; network effects; contracts; real estate; advertising (…)