Syllabus, Econ 157, Fall 2013 Last update: September 9, 2013

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Professor Jakub Kastl Stanford University
Landau-Economics 327 Department of Economics
jkastl@stanford.edu
Fall 2013
Phone: 725-3995

Econ 157: Imperfect Competition

Instructor: Professor Jakub Kastl, jkastl@stanford.edu, OH: Tuesday 10:00am-11:30am
(Landau-Economics 327).

Teaching assistants:
- TA and OH TBA

Course description: This is an advanced undergraduate course examining markets for
goods and services where there is relatively little regulation of firm behavior. We will use
game theory and information economics to study firm pricing behavior, the determinants
of market structure, how firms acquire and exploit market power and whether these
outcomes are likely to be socially optimal. Theoretical models will be illustrated with
real-world examples. Topics include monopoly, price discrimination, oligopoly, collusion
and cartel behavior, anti-competitive practices, the role of information in markets,
insurance, anti-trust policy and auctions.

Economics department common course policies: All courses taught in the Stanford
Department of Economics are governed by a common set of course management rules. A
document explaining these rules is included on our coursework website, and on the
Economics Department website at:
http://economics.stanford.edu/undergraduate/economics-common-syllabus.
Please be sure to read this document in its entirety, and contact me if you have any
questions. Note that it is your responsibility to get familiar with these policies, and
failure to do this does not constitute grounds for exceptions from these policies.

Prerequisites: Econ 51 must be completed before you enroll in Econ 157. There are no
exceptions for these prerequisites. For more information on prerequisites, please contact
the office for undergraduate studies at the economics department.
Since this is a class about microeconomics it will heavily rely on concepts which have
been introduced in Econ 51. If you have taken this course long time ago, it may be useful
to refresh your memory with its material. In addition to material from Econ 51, you
should be familiar with multivariate calculus and basic probability theory. In particular,
you should be able to take derivatives, know some constrained maximization (e.g. be able
to solve max(log(x) + log(y)) s.t. x+y=t), be able to solve simple non-linear equations and
be able to compute expectations of random variables. If you do not have a firm
mathematical background, this class might be very difficult for you.

Class and Exam Schedule: The class meets on Monday and Wednesday, 9:00am-
10:50am in Landau 106. Regular lectures will take place through December 4th.

Syllabus, Econ 157, Fall 2013 Last update: September 9, 2013

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We will make use of our coursework website, so please register at
http://coursework.stanford.edu as soon as possible.
There will be one midterm exam during class on Wednesday, October 23. The final
exam will be on Wednesday, December 11, 8:30am-11:30am. There will be no make-up
exams, and no early or late sittings for exams.

Problem sets: Problem sets constitute a major part of the course grade, and an even
larger part of your learning. There will be six problem sets during the quarter. It will be
hard to understand the material covered in lecture without solving the problem sets, so
please take the problem sets seriously. I encourage you to work in groups on problem
sets, but you should submit your own write-up. All problem sets will have a due date and
late problem sets will not be accepted. All problem sets, answer keys, and handouts will
be available on coursework after the submission deadline. ALL problem set scores will
count towards the final grade.

Grading: The grade in the course will be based on three components: problem sets, a
midterm exam, and a final exam.
The final grade for the course will be a weighted average of the above three components.
The weighting system is designed to provide students who did not do well in the midterm
an opportunity to do well in the course. For each student, we will calculate two averages.
The first will apply weights of 15% to problem sets, 35% to the midterm, and 50% to the
final. The second will apply weights of 15% to problem sets, 20% to the midterm, and
65% to the final. Your course grade will be the higher of the two. Thus, if you do poorly
in the midterm, it will only count towards 20% of your final grade, provided that you do
well in the final. All problem sets will have a due date and late problem sets will not be
accepted.

Texts: The textbook for the course

Pepall, Richards and Norman: Contemporary Industrial Organization: A Quantitative
Approach (2010)

Another useful book is available online:

Church, Jeffrey and Roger Ware, Industrial Organization: A Strategic Approach, 1
st

edition, available at: http://homepages.ucalgary.ca/~jrchurch/page4/page4.html

Other potentially useful books:
Dennis Carlton and Jeffrey Perloff, Modern Industrial Organization, 4
th
edition, 2004,
Pearson (C&P)

Oz Shy, Industrial Organization: Theory and Applications, 1995, MIT Press (Shy)

Students with documented disabilities: Students who have a physical or mental
impairment that may necessitate an academic accommodation or the use of auxiliary aids
and services in a class must initiate a request with the Student Disability Resource Center
Syllabus, Econ 157, Fall 2013 Last update: September 9, 2013

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(SDRC). The SDRC will evaluate the request along with the required documentation,
recommend appropriate accommodations, and prepare a verification letter dated in the
current academic term in which the request is being made. Please contact the SDRC as
soon as possible; timely notice is needed to arrange for appropriate accommodations.
The SDRC is located at 563 Salvatierra Walk (phone 723-1066 Voice; 725-1067 TTY;
http://www.stanford.edu/group/DRC).


Course outline: I list below the main topics we will cover, the approximate number of
lectures we will spend on each topic:
1) Firm behavior, Competition, Monopoly, Natural Monopoly and Durable Good
Monopoly and (2 lectures)
2) Price discrimination, Bundling (2 lectures)
3) Oligopoly models: Static (2 lectures)
4) Oligopoly models: Dynamic (3 lectures)
5) Mergers (1 lecture)
6) Strategic interaction, entry and exit (2 lectures)
7) Predatory Pricing (1 lecture)
8) Asymmetric Information, Adverse Selection and Insurance (2 lectures)
9) Auctions (3 lectures)