Economics 257

Industrial Organization I

Fall 2014


Professor Tim Bresnahan,

Professor Liran Einav,


Course Requirements


This course is the first of three courses in the Ph.D. sequence in Industrial Organization in the economics department (257, 258, and 260). 257 and 258 are required for the IO field, while 260 is strongly recommended for students who plan to write theses in IO. This year, Tim Bresnahan and Liran Einav will be teaching 257 and 260, and Michael Dickstein and Brad Larsen will be teaching 258. (In addition, Dickstein and Einav will also offer a graduate course in Health Economics -- Econ 249 -- in the Spring Quarter, but this is not a formal part of the IO sequence). As a prerequisite for 257, students should have completed the first year of the graduate sequence at the economics department, or have equivalent preparation. The course will use advanced methods in both theory and econometrics.

This course is designed to provide the training and preparation required to be a specialist in Industrial Organization.  As Industrial Organization is primarily an empirical field, the focus of the course will be on empirical work.  At the same time, little empirical work in IO takes place without theoretical underpinnings, and some of the best empirical work uses theory in a substantive way.  Thus, many segments of the course will begin with theory, and then move towards empirical work.  Only in a few places will we discuss theory without corresponding empirical tests.  Students interested primarily in IO theory should plan to also take several courses in the microeconomic theory sequence, while students who are more interested in the econometric methods are strongly encouraged to take Han Hong's class (Econ 273) in the Fall Quarter, which in parts covers similar topics from a more econometric perspective.


Historically, this class has required substantial time on problem sets focusing on empirical issues and econometrics.  We will do our best to structure those demanding problem sets in such a way that you spend your time on the economics rather than on programming and debugging. Thus, we hope that 257 will be accessible to students who wish to take IO as a second field. That said, some programming cannot be avoided and is part of the learning experience; all students, regardless of their specific interest, are expected to complete all parts of the problem sets.  There are also two research-planning exercises that students undertake as a team.


The course assignments will consist of several items:
(a) Before most classes, we will assign one or two papers, and students will be expected to familiarize themselves with this material.
(b) There will be 5 problem sets. Most of the problem sets will entail substantial empirical and computational exercises. Work on the last problem set will have to be done during dead week.
(c) The last item is aimed at helping you develop independent research ideas. Working in a group of 2-3 students, you will be assigned two projects. The first is a short (10 minute) presentation on a specific industry of your choice either in the US, in the EU, or in another major market. We expect you to explain the basic structure of the industry, provide descriptive statistics, and identify some interesting and researchable economic questions.  The industry should not be one which has been extensively studied in Economics, but instead one which should be studied.  The second project will be to come up with a precise positive proposal for a research project related to an open question in competition policy or regulation.  A list of potential topics is included in the course materials.  Every Wednesday class, we will conclude lecture early (around 2:40pm) for small group presentation and subsequent discussion of research ideas.  Presenters will be drawn by lot at the time of presentation.  After your group presents its industry summary or research proposal, you will be expected to submit a 1-2 page summary of it in hard copies.

Class grades will be based on problem sets (50%), small group projects (30%), and class participation (20%). All three are essential parts of the course and we expect students to take them seriously.