industrial economics (econ3400) week 1 july 24, 2008 room 323, bldg 3 semester 2, 2008 instructor:...

Industrial Economics(Econ3400)

Week 1July 24, 2008Room 323, Bldg 3Semester 2, 2008Instructor: Dr Shino Takayama

Agenda for Week 1

Course Profile (Syllabus) Introduction to I.O. Profit Maximization & Perfect

Competition Efficiency

The Instructor ?

Name: Shino (McLennan) Takayama Hometown: Osaka/Kyoto, Japan Ph.D in Economics from U MN, USA Arrival in AU: September, 2005 Moved from Sydney Uni. Financial Economics, Game Theory, Public

Economics Website: http://www.shino.info/ Email: s.takayama@economics.uq.edu.au Office: 617 @Colin Clark Office Hour: 11:00 – 12:00, Mondays

Econ3400 Industrial Economics

Textbook:

http://homepages.ucalgary.ca/~jrchurch/page4/page5/files/PostedIOSA.pdf

Course Description:The main objective of the lectures is to present applied topics in industrial economics.

Introduction to I.O.

I.O. (Industrial Organization) is a study about Market structure/organization Relationship with Firms’ Behavior

Methodology Structure Conduct Performance Game Theory

What we study: Strategy Based Approach

Profit Maximization

Firms Objective Profit Maximization

Firm’s Optimal Choice MP(q) = MR(q) – MC(q) MR(q*) = MC(q*) If MR > MC, expands output If MC > MR, reduce output

Perfect Competition

The 4 assumptions1. Many Buyers and Sellers2. Homogeneity of Output3. Perfect Information4. Free Entry or Exit

1 – 3 : Price Takers

From a Single Firm to Market

Profit-Maximizing Choice p = MC(q*)

Market Supply = sum of individual supply(p)

Market Equilibrium Supply(p) = Demand(p)

Efficiency Measures of Gains from

Trade Consumer Surplus Producer Surplus Total Surplus

Pareto Optimality If it is not possible to make

one person better off without making another worse off.