48
Political Economy
REGGIO DI CALABRIA
Overview
Date/time interval
Syllabus
Course Objectives
The course aims at providing students with the background and tools necessary to the analysis of imperfectly competitive markets and environmental policies in these markets. Industrial production and consumption patterns heavily rely on the intensive use of natural resources that creates concern for the environment. The need to regulate firm behaviour and ensure the sustainability of the economic system in the long run has found large consensus across scientists and policy makers. The course offers an overview for a better understanding of the determinants of firm behaviour in oligopolistic markets and in an antitrust perspective. By taking modern oligopoly theory as a benchmark, the course also deals with regulatory instruments, such as environmental taxation, and the way they interact with incentives towards collusion, horizontal and vertical mergers. It also examines firms’ incentives for green research and development (R&D) and environmental quality, as well as the role of corporate social responsibility, public firms and consumer environmental awareness as endogenous regulatory instruments.
At the end of the class, each student will acquire the following:
Knowledge and understanding
- Knowledge of the most important models of oligopolistic markets from both a static and a dynamic viewpoint
- Knowledge of the factors which determine firms’ market power in oligopolistic markets
- Understanding how the functioning of these markets is influenced by policy issues and by firms’ strategies
- Understanding the complex relation between the environmental and economic systems
- Basic knowledge of the methods for the assessment of environmental policies and their impact on firms' strategies
Ability to apply knowledge and understanding
- Ability to assess the implications of oligopolistic competition in terms of social welfare.
- Ability to predict how the functioning of these markets is influenced by policy issues and by firms’ strategies
- Ability to interpret the motivations of environmental impacts and their consequences, using the Industrial Organization approach.
- Ability to assess costs and benefits of different environmental policies
Independent thinking
- Ability to use economic thinking to interpret the relationship between different competitive scenarios and the environment
- Ability to assess the environmental performance of firms on markets and their contribution to sustainability
Communication skills
- Ability to illustrate the hypothesis, methods and results of Industrial Economics
Course Prerequisites
The course presumes that students are familiar with microeconomic theory and basic game theory.
Teaching Methods
Lectures and presentations performed by students to develop critical thinking and improve communication skills
Assessment Methods
Students are expected to demonstrate their knowledge and skills by presenting a scientific article and taking a 60-minute test. The grade will be based on: presentation of a published articles (50%); pass a test (50%).
Texts
- Belleflamme P., Peitz, M. Industrial Organization. Markets and Strategies. Cambridge University Press. 2015.
- Slides, handouts and exercises.
Articles:
· Bárcena-Ruiz, J. C., & Campo, M. L. (2020). Vertical integration and first-mover advantages in environmental taxes. Managerial and Decision Economics, vol. 41, pages 1033–1039.
· Bárcena-Ruiz, J. C., & Garzón, M. B. (2022). Environmental policy instruments and ownership of firms. The Manchester School, vol. 90, pages 385-408.
· Bárcena-Ruiz, J. C., & Sagasta, A. (2021). Environmental policies with consumer-friendly firms and cross-ownership. Economic Modelling, vol. 103, 105612.
· Buccella, D., Fanti, L. & Gori, L. (2021). To abate, or not to abate? A strategic approach on green production in Cournot and Bertrand duopolies. Energy Economics, vol. 96, pages 1-15.
· Cabon‐Dhersin, M.‐L. & Raffin, N. (2022). Cooperation in Green R&D and Environmental Policies: Taxes Versus Standards. Available at SSRN: https://ssrn.com/abstract=4067994.
· Chang, Y.-M. & Sellak, M., (2023). Environmental Policy in Vertical Markets with Downstream Pollution: Taxes Versus Standards, The B.E. Journal of Economic Analysis & Policy, vol. 23, pages 897-923
· Chiou, J.R. & Hu, J.L. (2001). Environmental Research Joint Ventures under Emission Taxes, Environmental & Resource Economics, vol. 20, pages 129-146.
· Espínola-Arredondo, A. & Zhao, H., (2012). Environmental policy in a linear city model of product differentiation, Environment and Development Economics, vol. 17, pages 461-477.
· Fanti, L. & Buccella, D. (2017). Corporate social responsibility in a game-theoretic context, Journal of Industrial and Business Economics, vol. 44, pages 371-390.
Contents
Static imperfect competition
A review of game-theoretic models of oligopolistic behavior
The endogenous choice between Bertrand vs. Cournot competition
Price competition under capacity constraints
Product differentiation
Horizontal product differentiation a and oligopolistic competition: the Hotelling models
Models of vertical product differentiation
Horizontal mergers and antitrust policy
Incentives towards horizontal mergers and the efficiency defence
Theory of collusion and competition policy
The instability of cartels in one-shot games
Unraveling in the repeated Prisoners’ Dilemma
Collusion sustainability under Cournot and Bertrand competition.
Optimal punishments a and partial collusion
Environmental economics
Pollution abatement under environmental regulation
Environmental Regulation under Sequential Competition
Green innovation