PKU-31  Empirical Studies in Industrial Organization

Spring 2009

Tuesday 9am -12pm Guanghua New Hall 117


Contact Information

Ginger Z. Jin
306 Guanghua New Hall
Guanghua School of Management
Phone: 62767521
E-mail:jin@econ.umd.edu
Web site: http://www.glue.umd.edu/~ginger/, click on "PKU-31"

Office Hour: Appointment by email

Overview
This course introduces students to the recent empirical literature of industrial organization. My goal is that, at the end of the semester, students will have a basic idea of how to start/conduct empirical research in applied microeconomics. Depending on student ability and student demand, the class will consist of 5 themes, for example pricing strategy, cartels and collusion, product differentiation, oligopolistic competition, information economics, entry and exit, etc. Each theme covers 2-3 lectures. In each lecture, we will focus on 1-3 resesarch papers and discuss their research question, related theory, data, identification strategies, estimation techniques and policy implications. Whenever possible, we will link the theme to related topics in China.
Prerequisite
You are assumed to be familiar with basic econometrics and microeconomics theory, including game theory. The course will be most beneficial if students have taken first year graduate courses in econometrics and micro-theory.
Readings
There is no text book. Reading list is provided in course outline. Most papers are electronically available at JSTOR (www.jstor.org), NBER working papers (www.nber.org) , or the PKU library (www.lib.pku.edu.cn). Unpublished papers usually have the latest version at the authors' websites or at the Social Science Research Network (www.ssrn.org). For papers that I could not provide a web link, copies will be available from my office a couple of days in advance.

The best reference book is the Handbook of Industrial Organization (3) edited by Mark Armstrong and Robert Porter. It is published by Elsevier in 2009. If this book is not available, Jean Tirole's The Theory of Industrial Organization, or Luis M.B. Cabral edited Readings in Industrial Organization is a good reference for the theoretical literature related to the topics we cover in class.

Assignments
You are required to fulfill the following assignments, with grading weights in parentheses. There is no mid-term or final.
(20) Class Performance
You are expected to read each paper before the class and actively participate in discussion during the class. The value of discussion will be maximized if you prepare well, listen to the others' comments and offer insights to your peers (and your professor). It is a good idea if you can review a list of questions while reading each paper before the class meeting.
(40) Referee reports
Throughout the class, I will provide two unpublished working papers. You are required to complete a referee report for each one of them. The report should summarize the strength and weakness of the paper, and provide suggestions for future improvements. The due dates are tentatively set at April 6 midnight (12am) and April 24 .
(40) Research Proposal
You are expected to assemble a research proposal at the end of the semester, describing a research question that you would like to answer in the area of business economics, the related literature, the potential contribution your study is going to make to the literature, the data you would like to use and the econometrics strategy you are going to adopt assuming the availability of perfect data. The proposal must be original (based on your own idea). It could be written in Chinese or English, preferably no more than 15 pages double space. Due date is June 15.
Course Outline
Theme 1: Pricing (Feb 17, Feb 24)
Ian Ayres and Peter Siegelman "Race and Gender Discrimination in Bargaining for a New Car" American Economic Review, 85(3), June. 1995. Available at Jstor.org.
Pinelopi K. Goldberg, "Dealer Price Discrimination in New Car Purchases: Evidence from the Consumer Expenditure Survey ", Journal of Political Economy    104 (June 1996), 622-654. Available at Jstor.org.
John List, "The Nature and Extent of Discrimination in the Marketplace: Evidence from the Field" The Quarterly Journal of Economics, Feb. 2004, 49-89.
Phillip Leslie and Alan Sorensen " The Welfare Effects of Ticket Resale" Stanford working paper.
Case Discussion: Doctor Appointment Reservation Card at Tianjin Children's Hospital, news reported at Beijing Qing Nian Bao Feb 18, 2009.
Theme 2: Cartel and Collusion (Mar. 2, Mar. 9, + one more class if necessary)
Robert Porter: "A Study of Cartel Stability: The Joint Executive Committee, 1880-1886", Bell Journal of Economics 14 (Autumn 1983), 301-314. Available at Jstor.org.
Chris Knittel and Victor Stango: "Price Ceilings as Focal Points for Tacit Collusion: Evidence from Credit Cards" American Economic Review, Dec. 2003. Available at Jstor.org.
Case Discussion: Price war between China Eastern and Top 3 Airlines in Chengdu, Sina News, Jan. 2009?
Theme 3: Oligopolistic Competition in Differentiated Products Markets (Mar. 24, Mar. 31, Apr. 7)

Pinelopi K. Goldberg
, "Product Differentiation and Oligopoly in International Markets: The Case of The U.S. Automobile Industry", Econometrica 63 (July 1995). Available at Jstor.org.

Steve Berry, James Levinsohn and Ariel Pakes: " Voluntary Export Restraints on Automobiles: Evaluating a Strategic Trade Policy" American Economic Review 89(3) (1999) 400-430. Available at Jstor.org.

Amil Petrin: "Quantifying the Benefits of New Products: The Case of the Mnivan" Journal of Political Economy 110(4), August 2002. Available at Jstor.org.
Referee report discussion Wholesale Price Discrimination and Regulation: Implications for Retail Gasoline Prices by Justine Hastings.
Referee report is due Apr. 4 by email before the class discussion of the refereed paper on Apr. 7. In the class discussion, 1-2 students will present the paper, the rest of the class provides feedback.
Theme 4: Information Issues (Apr. 14, 21, 28)
Ken Hendricks and Robert Porter: "An Empirical Study of an Auction with Asymmetric Information" American Economic Review Dec 1988, 865-883. Available at Jstor.org.
Pierre-Andre Chiappori and Bernard Salanie "Testing for Asymmetric Information in Insurance Markets" Journal of Political Economy 2000, 108(1): 56-78. Available at Jstor.org
Daniel Ackerberg, "Empirically Distinguishing Informative and Prestige Effects of Advertising " Rand Journal of Economics, Summer 2001. Available at Jstor.org.
Pradeep Chintagunta, Renna Jiang and Ginger Jin "Information, Learning, and Drug Diffusion: the Case of Cox-2 Inhibitors" (working paper).
Ginger Zhe Jin and Phillip Leslie "The Effects of Information on Product Quality: Evidence from Restaurant Hygiene Grade Cards" Quarterly Journal of Economics, May 2003, 118(2), 409-51. Available at Jstor.org.
David Dranove, Dan Kessler, Mark McClellan and Mark Satterthwaite (2003) "Is More Information Better? The Effects of 'Report Cards' on Health Care Providers" Journal of Political Economy, June 2003, 111(3):555-588. Available at Jstor.org.
Referee report discussion Estimating Welfare in Insurance Markets Using Variations in Prices by Liran Einav, Amy Finkelstein and Mark R. Cullen.
Referee report is due (Apr. 24 by email) before the class discussion of the refereed paper on Apr. 28. In the class discussion, 1-2 students will present the paper, the rest of the class provides feedback.
Theme 5: Entry and other Long-run Decisions (May 5, 12, 26)
Tim Bresnahan and Peter Reiss: "Entry and Competition in Concentrated Markets," Journal of Political Economy 99 (Oct. 1991), 977-1009, available at Jstor.org.
John Sutton Sunk Costs and Market Structure: Price Competition, Advertising, and the Evolution of Concentration, 1991, The MIT Press, Book Review by Tim Bresnahan in RAND (Spring 1992) 137-152. Available at Jstor.org.
Steve Berry and Joel Waldfogel: "Free Entry and Social Inefficiency in Radio Broadcasting", Rand Journal of Economics 30 (Autumn 1999), 397-420. Available at Jstor.org.
Austin Goolsbee and Chad Syverson: "How do incumbents respond to the threat of entry? Evidence from the major airlines" forthcoming Quarterly Journal of Economics.
No class on May 19.
On May 26, up to 6 students will present their idea of the final research proposal and the rest of the class provide feedback. Each presenting student has 25 minutes. If more students are willing to present, we can extend this to June 2.