Topic 4: Will profits in reality be higher or lower than under Cournot?

In this topic we try to answer the question: “Will profits in reality be higher or lower than under Cournot?”. We begin by reminding ourselves of the origins of Cournot competition, and then go on to analyse collusion in dynamic oligopoly, and repeated games.

Note that since we did not cover any of these slides in week 4, the class and lecture from week 4 are placed under topic 3.




Topic 2: Basic oligopoly

In this topic, we start with a game theory refresher, and then we move on to take a fresh look at Bertrand and Cournot oligopoly.


Note that in my rush to get through those Bertrand examples, I may have slightly mislead you about the fourth and fifth ones.

To recall, the fourth one had costs of 100, 102 and 104. There is certainly an equilibrium with prices of 101, 102 and 102 or higher, as I said in the lecture. But there’s also an equilibrium with 102, 103 and 103 or higher, as firm 2 doesn’t want to deviate down since at 102 they’re also making zero profits. As someone pointed out after the lecture, with completely inelastic demand, 102, 102, 103 is also an equilibrium, as getting half the market with 2 pounds profit per unit gives the same profits as getting the whole market with 1 pounds profit per unit. But with normal downwards sloping demand, 102, 102, 103 will not be an equilibrium, as demand at 102 will be lower than demand at 101, making 101 a profitable deviation for firm 1 (so it’s normally safe to ignore this equilibrium).

See the class for more information.



Jean Tirole wins the 2014 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel

Tirole has made many huge contributions to the field of Industrial Organisation that we’re studying this semester. I know I’m a bit late on this as I’ve been away, but here’s a nice summary of why Tirole deserved to win the prize.

We’ll be seeing some of his work later in the Industrial Organisation course, and this perhaps gives you an additional reason to consult his excellent textbook.

For more information, read this non-technical introduction to his work, or this more comprehensive one.


Welcome to the 2014 Industrial Organisation site

This year’s course will be very similar to the 2013 and 2012 ones, which you can see by clicking on the links on the right, or at the top.

In previous years, I have shared the slides on, but for some reason, that site is no longer allowing people to download. Thus for your convenience, here is a list of links to download last year’s slides: lecture 1 lecture 2 lecture 3 lecture 4 lecture 5 lecture 6 lecture 7 lecture 8 lecture 9. I will upload this year’s slides as we go, with only minor modifications.

All of the videos of me teaching last year’s course are up on the course youtube channel here.

Again, the textbook is:

Alternative texts:

Hope you enjoy the course.


Welcome to my site

Thanks for visiting this site.

The site is currently under development, so may be in a state of flux for the next few weeks.

I am unsure as yet how often I will be posting in this blog, but I will try to at least share interesting econ links here as I stumble across them.