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1、IndustrialOrganizationTaughtbyDr.Prof.FangQiyunTextbook:IndustrialOrganization:AStrategicApproachWrittenbyJeffreyChurch&RogerWarePart1.FoundationsIntroductionThewelfareeconomicsofmarketpowerTheoryofthefirmCh.1.Introduction3questionsinIO1.Whyaremarketsorganizedorst
2、ructuredastheyare?4aspectsofmarketstructure(1)Firmboundaries.Whatdeterminestheextentofafirm’sactivitiesinproduction?Inparticular,whatarethefactorsresponsiblefordeterminingtheextenttowhichafirmisverticallyintegrated?(2)Sellerconcentration.sellerconcentrationisameas
3、ureofthenumberandsizedistributionoffirms.Industrialorganizationattemptstoidentifythefactorsthatinfluenceordeterminesellerconcentration.(3)Productdifferentiation.Productdifferentiationexistswhenproductproducedbydifferentfirmsarenotviewedasperfectsubstitutesbyconsum
4、ers.Whatarethefactorsresponsiblefortheextentofproductdifferentiation.(4)Conditionsofentry.Theconditionsofentryrefertotheeasewithwhichnewfirmscanenteramarket.3questionsinIO2.Howdoesthemannerinwhichmarketsareorganizedaffectthewayinwhichfirmsbehaveandmarketperform?If
5、productsproducedbydifferentfirmsarenotviewedasperfectsubstitutesbyconsumers,thentherewillbearolefoenon-pricecompetition.Infactpricecompetitionmightplayasecondaryroletoothercompetition,suchasproductcharacteristics,advertising,andresearchanddevelopmentexpenditure.Am
6、ajorareaofresearchinindustrialorganizationisconcernedwiththetheoryofoligopoly:pricingbehaviorinamarketdominatedbyafewlargefirms.Adifferentkindofstructuralissueconcernsthevariousinstitutionsandpracticesadoptedbyoligopolisticfirmstoaffectthenatureofcompetition.AdamS
7、mith:competitivemarketsweredesirablebecausetheyledtooutcomesthataresociallyoptimal.Undercertaincircumstances,competition,asifguidedbyaninvisiblehand,resultsinthesociallyoptimallevelofoutputbeingproducedatminimumresourcecost,anddistributedittothosewhovalueitthemost
8、.IOisconcernedwiththeefficiencyormarketperformanceofmarketswhosestructureisnotthatare:Whatwilltheefficiencypropertiesofimperfectlycompetitionmarketsbe,n