Industrial Organization

common practice of modern firms

Examples: advertising, price discrimination
(b) Focus on a common feature of modern markets
Examples: role of new technology, government regulation
After choosing one of the two general approaches above, you should decide whether you want to do
a case study, an empirical analysis, or a theoretical analysis within that general approach.
(a) A Common Practice of Modern Firms
Select a firm practice that interests you. In preparation for undertaking the research, you should
evaluate the industries and major firms to which this practice appears to be important. Compare and
contrast: why is this practice more prevalent in one industry than another? Why does firm X adopt
this practice more than firm Y?
Brainstorming in this manner should lead you to some interesting research topics.
For a case study, you should examine a particular instance of this practice by a firm (or select
group of firms) in an industry. In general, you should pick an instance where the practice raises
some public policy concerns. As you are choosing a single instance, I will expect a detailed, microlevel analysis, along the same lines as the case studies presented in The Antitrust Revolution.
For an empirical study, you should collect data on firms and/or industries in which these practice
occur in differing amount or form. Use the data to measure either the determinants of the practice
(what are the factors that lead firms to adopt this practice) or the impact of the practice on
firm/industry performance. An ideal paper would examine both. The main constraints would be [1]
the availability of relevant data and [2] familiarity with econometrics and econometrics software.
For a theoretical study, you can do one of two things: you can either write a literature review on
the recent models proposed by academic economists to explain some aspect of the chosen firm
practice or write your own model (can and most likely will be an extension of an existing model).
The first option will require you to read and synthesize quite a few academic papers, some of which will be technical in nature. The second option will require you to gain familiarity with the analytical
tools of modern economics, including constrained optimization and game theory.
(b) A Common Feature of Modern Markets
This approach is similar to (a) above but focuses on a market feature instead of a firm practice.

You may use research material obtained from writing a paper in previous or concurrent economics
courses as long as you gain my prior approval. However, I expect the paper you hand in to me to
have substantial original material. You cannot just turn in the same paper or just rehash the same
material.
2. Team Project (Industry Analysis)
The objective of the team project is for you to work with your teammates and engage in in-depth
research of an industry from the perspective of an economist, and I expect you to show great
teamwork.
You want to explore how the market functions, how firms compete (price? product variety? services?
etc.), how easy is entry, how much entry and exit there has been, how competitive the industry is,
and so forth. You may also study important features and/or events of the industry by documenting
the frequency of price changes, the extent of price dispersion, major mergers and acquisitions,
regulations and deregulations, and so on. You need not cover all of those topics but can focus on a
subset of them. All that is really important is that your project serves to help us understand the
industry better. I’d prefer that you avoid generalities and instead focus on a particular dimension in
detail.

 
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