This document provides an introduction to an industrial economics course. It discusses the field of industrial organization/industrial economics, which examines imperfectly competitive markets and firm behavior within these markets. The course objectives are to analyze the role, structure, and growth of firms and industries, as well as relevant policy issues. The course will cover topics such as the theory of the firm, market concentration, industrial location, firm structure, diversification, and technological progress. Students will be assessed through assignments, quizzes, tests, presentations, attendance, and a final exam.
This document provides an introduction to an industrial economics course. It discusses the field of industrial organization/industrial economics, which examines imperfectly competitive markets and firm behavior within these markets. The course objectives are to analyze the role, structure, and growth of firms and industries, as well as relevant policy issues. The course will cover topics such as the theory of the firm, market concentration, industrial location, firm structure, diversification, and technological progress. Students will be assessed through assignments, quizzes, tests, presentations, attendance, and a final exam.
This document provides an introduction to an industrial economics course. It discusses the field of industrial organization/industrial economics, which examines imperfectly competitive markets and firm behavior within these markets. The course objectives are to analyze the role, structure, and growth of firms and industries, as well as relevant policy issues. The course will cover topics such as the theory of the firm, market concentration, industrial location, firm structure, diversification, and technological progress. Students will be assessed through assignments, quizzes, tests, presentations, attendance, and a final exam.
This document provides an introduction to an industrial economics course. It discusses the field of industrial organization/industrial economics, which examines imperfectly competitive markets and firm behavior within these markets. The course objectives are to analyze the role, structure, and growth of firms and industries, as well as relevant policy issues. The course will cover topics such as the theory of the firm, market concentration, industrial location, firm structure, diversification, and technological progress. Students will be assessed through assignments, quizzes, tests, presentations, attendance, and a final exam.
MADDA WALABU UNIVERSITY Mesfin Abraham (2013) MA IN DEVELOPMENT POLICY (Specializing in Trade and Industrial Policy) COURSE INTRODUCTION COURSE NAME: Industrial Economics Industrial Organization The Economics of Industry Course description: Industrial Organization or Industrial Economics is the study of the operation and performance of imperfectly competitive markets and the behavior of firms in these markets. It is the field of economics concerned with markets and firms where the applicability and explanatory power of the theory of perfect competition is questionable because for some reason there is insufficient competition.
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COURSE INTRODUCTION Course Objective: The broad objective of this course is to acquaint the student with the theoretical approaches and empirical analysis of the role, structure and growth of the firms and industry on the one hand, and policy issues governing industrial economics in developed and developing countries on the other hand.
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COURSE INTRODUCTION Course Contents: Chapter 1: Introduction What is Industrial Economics? Why we study industrial Economics? Approaches in IO Chapter 2: The Theory of the Firm Why do firms exist? When and why do firms grow? The life cycle of the firm Modern theories of the Firm Managerial Theory of the Firm Principal-Agent theory Transaction cost Theory Growth of the firm
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COURSE INTRODUCTION Chapter 3: Market Concentration What is concentration? Why do we care about it? Theories of Concentration Measures of Concentration Concentration Ratio HHI, Learner Index, Dispersion Method Determinants of Concentration Chapter 4: Industrial Location Analysis Does location matter? Where does firms locate and why? Determinants of industrial location Approaches to industrial location
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COURSE INTRODUCTION Chapter 5: Analysis of Firm Structure Organization, Structure, Ownership and control of Firm Does structure and ownership matter? Why? Goal and Objective of Firm What are the different goals of firms? Legal Forms of Business Structure – conduct – performance What are structure, conduct and performance? Does industrial structure affect conduct and performance? Measurement of Market Performance and Market Structure How do we measure market performance and structure?
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COURSE INTRODUCTION Chapter 6: Diversification, Integration and Merger What are the different forms in which firms grow? What are diversification, integration and merger? Vertical Integration and Vertical Restrictions Vertical Relationship as a solution to Economic Problems The reasons for and against vertical Integration Merger and Takeover(Motives for Merger) The effects of Merger on Competition and Welfare Chapter 7: Advertisement Why advertise? Information and Advertisement The role of information and advertisement The Social benefit and cost of Advertising 7 Lecture Notes in Industrial Economics 12/4/2020 COURSE INTRODUCTION Chapter 8: Technological Progress The nature and role of technological progress Stages of Technological change Invention, Innovation and Diffusion Chapter 9:Industrial Policy What is industrial policy What are the pros and cons of industrial policy? Government Intervention Review of Focuses of the Ethiopian Industrial Policy
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COURSE INTRODUCTION Lecture Method and Assessment Lecture Method In-class problem solving Group Work Assignment Assessment method Weight Assignment 20 (Individual/group) Quizzes 15 Tests 20 Presentation 5 Attendance 5 Final Exam 40 Total 100
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Chapter 1 – Introduction to IO What is Industrial Economics? Industrial Organization or Industrial Economics is the study of the operation and performance of imperfectly competitive markets and the behavior of firms in these markets. It is the field of economics concerned with markets and firms where the applicability and explanatory power of the theory of perfect competition is questionable because for some reason there is insufficient competition.
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Chapter 1 – Introduction to IO What do we study in Industrial Economics? The unit of analysis in IO are Firms and Industries Given scarcity, the producer has to take decisions about production and distribution. There are several basic issues on which the producer will be taking decisions such as: What, Where and how much commodities he should produce, What type of technology he should adopt, What should be the size of his factory, what price he should charge, How much wages should pay, how much he should spend on advertisement, Should he borrow from banks or elsewhere, etc. All such decisions explain the producer's behavior in different market situations, which we endeavor to study in industrial economics. 11 Lecture Notes in Industrial Economics 12/4/2020 Chapter 1 – Introduction to IO Three basic questions in IO related to Industries Why are markets organized or structured as they are? How does the manner in which markets are organized affect the way in which firms behave and markets perform? How does the behavior of firms influence the structure or organization of markets and the performance of markets?
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Chapter 1 – Introduction to IO Microeconomics Vs Industrial Economics In microeconomics also we study producer’s behavior in relation to scarcity of resources. Because of this fact, some economists would regard industrial economics as being primarily an elaboration of, and development from, the traditional theory of the firm taught under microeconomics. Industrial economics is best defined as the application of micro economic theory to the analysis of firms, markets and industries. The distinction between Microeconomics and IO arises from the overriding emphasis, in industrial economics, on empirical work and on implications for policy.
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Chapter 1 – Introduction to IO Microeconomics Industrial Economics Is a formal, deductive and Industrial economics on the abstract discipline. other hand is less formal, more It is passive in approach. inductive in nature. By and large it assumes profit It is an active discipline maximization as the goal of the It searches the goals of the firm firm & tells us to maximize it from the revealed facts and subject to given constraints. concentrates on the constraints which impede the achievement Being abstract it does not go into of the goals and tries to operational details of production, remove them. distribution and other aspects of Industrial economics does go the firms and industries. into the depth of such details. Microeconomics may shun Public Public Policy implications are policy implications if necessary. discussed in IO Chapter 1 – Introduction to IO Industrial economics addresses decision making under conditions of scarcity from society’s (macro) dimensions as well. For a society as a whole the resources for production are scarce just as in the case of a producer. With scarce resources, the problem is to produce varieties of goods and services in-the current period and in the future also. What goods should be produced: consumer or capital? If capital good are preferred, then the series of problems faced by the society may be: What types of capital goods; What type of factory (large vs. small scale); Where to produce (locational problem); How to distribute them; etc 15 Lecture Notes in Industrial Economics 12/4/2020 Chapter 1 – Introduction to IO The decisions in the context of society as a whole may be at variance with the decisions by an individual producer. If this is so, a state will clearly specify the policy framework in which the individual producers will function In other words, to achieve the broader policy objectives, a state will regulate industries through varieties of ways such a nationalization, privatization, anti-trust policies, control on prices and outputs, credit controls, taxes, etc. A study of all such instruments of industrial regulation is an integral part of industrial economics. How they affect the performance of the firms is a crucial aspect to be examined under industrial economics. Such information is useful for the regulatory agency of the government to assess the success of its industrial policy.
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Chapter 1 – Introduction to IO In general: Industrial economics is predominantly an empirical discipline having micro and macro aspects. It has a strong theoretical base IN microeconomics. It provides useful applications for industrial management and public policies.
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Chapter 1 – Some Basic Concepts in the Study of Industrial Economics The Firm: A firm is an organization owned by one or jointly by a few or many individuals which is engaged in productive activity of any kind for the sake of profit or some other well defined aim. Most of the firms owned by private individuals in manufacturing trade and services will aspire for profits but there may be some other such as government companies where profit motivation will be secondary or missing altogether. The industry: A group of firms producing a single homogeneous product and selling it in a common market (Convention definition) A group of sellers of close substitute outputs who supply to a common group of buyers (unconventional but better) 18 Lecture Notes in Industrial Economics 12/4/2020 Chapter 1 – Some Basic Concepts in the Study of Industrial Economics Market: This is defined as a closely interrelated group of sellers and buyers for a commodity. The term is not equivalent to the industry since in the latter case we will be looking only at the seller’s side of the market. Market power: It refers to the influence that any particular buyer or seller can exercise over the price of a product. It indicates the degree to which a business firm is able to earn larger than normal profits.
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Chapter 1 – Some Basic Concepts in the Study of Industrial Economics COMPETITON: When competition is defined as a process The degree to which firms in an industry compete or rival for getting more market share, sales or customers. When competition is defined as a market structure It refers to the market structure knows as perfect competition with all its assumptions or preconditions conditions Two broadly categories of market structure: 1. Perfect Competition 2. Imperfect Competition Imperfect competition is said to exist in an industry when one or more assumptions of perfect competition are absent. Or simple when firms have some degree of market power
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