Monopoly Competition & Public Policy (350-0-20)
Instructors
James Andrew Hornsten
847/491-8220
I'm a microeconomist interested in intellectual property, clever pricing schemes, corporate boards of directors, regulatory issues, and the myriad ways businesses compete for customers. I commute year-round from Skokie on a folding bike and always wear my helmet (while biking). Technically, I've worked as a professional actor, mover, dance instructor, book reviewer, custodian, and screen printer (but my experience in each is VERY limited). As a Northwestern graduate student, I camped out for tickets and saw the Wildcats play in the 1996 Rose Bowl. In the next year, I aspire to try a lot of new restaurants, bicycle 3000 miles, finish some dated (but still unopened) computer games, learn to juggle, watch the Vikings win the Super Bowl, and eat properly-made s'mores around a campfire while watching a good meteor shower on a clear night out in the boondocks with my wife and two sons.
Meeting Info
Harris Hall L07: Tues, Thurs 9:30AM - 10:50AM
Overview of class
This course focuses on a particular market failure - monopoly - in the context of antitrust law, public utility regulation, network effects, and intellectual property. First, profit-seeking firms may try to reduce competition through entry deterrence, predation, horizontal mergers, vertical integration, or collusion. We will use economic theory and landmark legal cases to study the purpose and development of antitrust law, which is meant to reduce the adverse effects of anti-competitive business practices. Next, large fixed costs of building and maintaining a physical network may generate natural monopolies in markets for electric power, natural gas, and water. We will explore the challenges regulators face when they attempt to apply market controls such as price caps so an essential service remains affordable. We will also ponder the proper role of government in today's digital economy, which features a number of platforms featuring network effects that result in a small number of operating systems, streaming services or social networks. Finally, society might be willing to trade short-term welfare loss for long-term gains by granting temporary monopolies (e.g., patents or copyrights) to provide an incentive to innovate. We will analyze the ideal scope of artificial monopoly rights and the natural tension between intellectual property and antitrust law. Throughout the course we will explore the general topic of regulation and industry cases, both current and historical.
Registration Requirements
ECON 281-0, ECON 310-1, ECON 310-2 Instructor Notes: This course covers advanced material on monopoly and game-theoretic oligopoly models.
Learning Objectives
After completing this course you will be able to use decision- and/or game-theoretic models to answer the following types of problems: 1. Conduct welfare analysis for a monopoly facing a variety of demand and cost conditions. 2. Predict the profit-maximizing input choice of a standard monopsony. 3. Compare a natural monopoly's choices under several kinds of regulation. 4. Show how the terms of a licensing contract will affect the revenues of a patent holder. 5. Explain an antitrust authority's concern with a merger or case of predation.
Teaching Method
Two 80-minute meetings per week, which will feature lectures, problem solving, and discussions of how to reconcile our models with current events (e.g., antitrust concerns over monopsonistic behavior). There will also be an enrollment-contingent discussion session, during which the teaching assistant will present some original material, work through practice exercises, and discuss the recent problem set or exam.
Evaluation Method
Three unit exams, a group project (on regulation or antitrust), and weekly problem sets.
Class Materials (Required)
Viscusi, Harrington, Jr. and Sappington (2018) Economics of Regulation and Antitrust, 5th edition, Cambridge: MIT Press, ISBN: 978-0262038065 Plus provided readings
Class Materials (Suggested)
N/A
Class Notes
N/A
Enrollment Requirements
Enrollment Requirements: Pre-requisite: Students must have taken ECON 310-1 or MMSS 211-1 and ECON 281 or ECON 381-1 or MATH 386-1 or IEMS 304 or STAT 350 to successfully enroll in this course.
Associated Classes
DIS - Harris Hall L07: Fri 10:00AM - 10:50AM