UNIVERSITY OF ALBERTA
Department of Economics
ECON 472 – B1
Market Power: Theory and Policy Winter 2016
Instructor:
Andrew Eckert Office: Tory 9-29 Phone: 492-3959
Email: [email protected]
Class Schedule:
Lectures: M W F 10:00 – 10:50 AM, T1-119.
Office Hours: Monday and Wednesday, 1:30 – 2:30. I am also available by appointment.
Additional office hours may be added before exam dates.
Prerequisites:
ECON 384 and MATH 113 or consent of the Department. These prerequisites will be checked and registration will be cancelled for students without these courses.Purpose of the Course:
In this course we will discuss the economics of competition policy with a focus on the application of the Canadian Competition Act. Topics to be discussed will include the measurement of market power, merger analysis, collusion and other horizontal agreements, predation, abuse of dominance and vertical integration and restraints.
Important Canadian competition cases will be discussed under each topic.
Evaluation:
The final grade (out of 100) for the course will be determined according to the following formula:
Term Paper (Due: April 1) 20%
Homework Assignments (2) 15%
Midterm exam (February 29) 25%
Final Exam (April 21, tentative) 40%
The final exam will be cumulative, covering material from the entire term. More weight will be placed on material presented after the midterm exam. NOTE: The final exam date listed is tentative - you need to check the date and time for the correct section of the final exam later).
These grades will then be translated into letter grades, targeting a class average between 3.0 and 3.3 (ie. B to B+), although in certain circumstances it is possible for the class average to lie outside of the [3.0, 3.3] interval. Both absolute performance and
performance relative to the rest of the class will be considered in determining your letter grades. Credit is not given for attendance or in-class participation.
This course involves a term paper. Grades on these assignments will be based on writing as well as content. See the instruction page for the term paper for more details.
University policy on missed exams and term work can be found in Section 23.3 of the Calendar. Term papers or homework assignments submitted late without an acceptable reason being given will receive a grade of zero. Note that approval for late submission of a term paper, homework or for missing the midterm exam is at my discretion. Students who offer a medical justification must submit the Request for Deferral of Examinations and/or Term Work form, available on the Faculty of Arts webpage. Students who miss the midterm exam for an acceptable reason will have the weight of the midterm put on the final exam. Students requesting a deferred final exam must do so at their home Faculty office.
The deferred final examination for those students who are granted one will be held on Tuesday May 10, 2016, at 2:00 PM.
Access to Past and Present Evaluative Materials
Past exams, along with additional practice questions for both the midterm and final (without answer keys) will be posted online on the course eclass page. Eclass will also be used to distribute PowerPoint slides after each lecture.
Textbooks:
The required textbook (referred to below as PRN) is:
Pepall, L., D. Richards and G. Norman (2013): Industrial Organization: Contemporary Theory and Empirical Applications, 5th Edition, Blackwell Publishing.
Note: both electronic and hardcopy versions are available through the library. Both are acceptable. Older editions are also acceptable, but you should bring your copy to my office to check that all of the relevant information is in your edition.
In addition, some of the course material will be based on chapters from the following book (referred to below as CW):
Church, J. and R. Ware (2000): Industrial Organization: A Strategic Approach, McGraw- Hill. Available online at http://homepages.ucalgary.ca/~jrchurch/page4/page4.html.
The following three books (referred to below as BK, Buccirossi, and TWCI) contain readings that are recommended (but not required) for those students wishing to have a more intuitive treatment of the theory or more discussion of specific competition cases.
All have been placed on reserve in Rutherford Library.
Blair, R. and D. Kaserman (2009): Antitrust Economics, Oxford University Press.
Buccirossi, P., editor (2008): Handbook of Antitrust Economics, MIT Press.
Trebilcock, M., R. Winter, P. Collins and E. Iacobucci (2002): The Law and Economics of Canadian Competition Policy, University of Toronto Press.
Throughout the course, we will be referring to the Competition Act. This is available on the ECON 472 eclass page, and also can be found online at the Department of Justice website, at http://www.laws.justice.gc.ca/eng/acts/C-34/index.html. We will also be discussing various Guidelines issued by the Competition Bureau; these are available on the Competition Bureau website.
Other readings are available online through the library website, are on reserve in Rutherford library, or can be found on the website for this course.
Course Outline and Readings
Note: This course outline is subject to change. New readings may be added, and the order of presentation may change. ALSO, note that the dates given are
approximate.
1. The Monopoly Problem and Competition Policy (January 4-8) Required Readings
PRN Chapter 2
Competition Act, Parts I, VI, VIII, IX Recommended Readings
BK, Chapter 3
CW, Appendix and Chapter 4
Ross, T. (1998): “Introduction: The Evolution of Competition Law in Canada,” Review of Industrial Organization, 13: 1-23.
TWCI, Chapters 1 and 2.
2. Review of Oligopoly (January 11-15) Recommended Readings
PRN Chapters 9 and 10
Online notes, available on eclass
3. Market Definition and Measurement of Market Power (January 19 - 29) Required Readings
PRN Chapter 3 CW, Chapter 19
Competition Bureau Merger Enforcement Guidelines, Parts III and IV Recommended Readings
Audy, E. and C. Erutku (2005): “Price Tests to Define Markets: An Application
to Wholesale Gasoline in Canada,” Journal of Competition, Industry and Trade, 5: 137-154.
Twomey, P., R. Green, K. Neuhoff and D. Newbery (2005): “A Review of the Monitoring of Market Power,” Journal of Energy Literature, 11:3-54.
BK Chapter 6 CW, Chapter 12
McAfee, P., H. Mialon and M. Williams (2004): “What is a Barrier to Entry?” American Economic Review, 94: 461-465.
TWCI, Chapter 2, sections X and XI.
4. Collusion (February 1 - 12) Required Readings
PRN Chapter 14
Competition Bureau Competitor Collaboration Guidelines Recommended Readings
BK, Chapters 9, 10 and 11 (sections 2 to 5) Buccirossi, Chapter 6
CW, Chapter 10
Erutku, C. and V. A. Hildebrand (2010): “Conspiracy at the Pump,” Journal of Law and Economics, 53: 223-236.
Hughes, P. and M. Sanderson (1998): “Conspiracy Law and Jurisprudence in Canada:
Towards and Economic Approach,” Review of Industrial Organization, 13: 153- 176.
Ross, T. and J. Brander (2006): "Estimating Damages from Price-Fixing,” Canadian Class Action Review, 3: 335-369.
5. Horizontal Mergers (February 22-26, March 2-4. Note: Midterm is February 29) Required Readings
PRN Chapter 15
Competition Bureau Merger Enforcement Guidelines Recommended Readings
BK Chapter 12 CW Chapter 23.
Mathewson, G.F. and Winter, R. (2000): “The Analysis of Efficiencies in Superior Propane: Correct Criterion Incorrectly Applied”, Canadian Competition Record, 20: 88-97.
Ross, T. And R. Winter, (2005): “The Efficiency Defence in Merger Law: Economic Foundations and Recent Canadian Developments,” Antitrust Law Journal, 72:
471-503.
The Commissioner of Competition v. Superior Propane Inc., 2000 Comp Trib. 15.
Federal Court of Appeal Decision in Commissioner of Competition v. Superior Propane Inc. and ICG Propane Inc., April 4, 2001.
6. Predatory Pricing (March 7 - 18) Required Readings
PRN Chapters 11.4, 12, 13 (except section 13.3) CW Chapter 21
Competition Bureau, Predatory Pricing Guidelines and Abuse of Dominance Guidelines Recommended Readings
BK Chapter 8
TWCI Chapters 5 (Section 1)
McFetridge, D. (2004): “The Commissioner of Competition v. Air Canada: Phase I,”
Canadian Competition Record, Spring, 81-98. Available online at http://http-server.carleton.ca/~dmcfet/personal/predpap5.PDF.
Morton (1997): “Entry and Predation: British Shipping Cartels 1879-1929”, Journal of Economics and Management Strategy, 6: 679-724.
Riordan, M., P. Bolton and J. Brodley (2000): "Predatory Pricing: Strategic Theory and Legal Policy" Georgetown Law Journal, 88: 2239-2330.
Ross, T. And W. Stanbury (2001): “Dealing with Predatory Conduct in the Canadian Airline Industry: A Proposal,” Canadian Competition Record, Summer: 59-76.
7. Vertical Integration and Vertical Merger (March 21 – March 28) Required Readings
PRN Chapter 16
Recommended Readings
BK Chapters 14 and 15
Basso, L. and T. Ross (2010): “Measuring the True Harm From Price-Fixing to Both Direct and Indirect Purchasers,” Journal of Industrial Economics, 58: 895-927.
Buccirossi Chapters 9 and 10 CW Chapter 22
8. Vertical Restraints, Tying and Bundling (March 30 – April 8) Required Readings
PRN Chapters 8,13.3, 17 and 18 Recommended Readings
BK Chapters 16 - 21 CW Chapter 22
Mathewson, F. and R. Winter (1998): “The Law and Economics of Retail Price Maintenance,” Review of Industrial Organization, 13: 57-84.
TWCI Chapters 6 and 7
Other Notes:
Audio or video recording of lectures, labs, seminars or any other teaching environment by students is allowed only with the prior written consent of the instructor or as a part of an approved accommodation plan. Recorded material is to be used solely for personal study, and is not to be used or distributed for any other purpose without prior written consent from the content author(s).
Policy about course outlines can be found in Section 23.4 (2) of the University Calendar.
The University of Alberta is committed to the highest standards of academic integrity and honesty. Students are expected to be familiar with these standards regarding academic honesty and to uphold the policies of the University in this respect. Students are particularly urged to familiarize themselves with the provisions of the Code of Student Behavior (online at www.governance.ualberta.ca) and avoid any behaviour which could potentially result in suspicions of cheating, plagiarism, misrepresentation of facts and/or participation in an offence. Academic dishonesty is a serious offence and can result in suspension or expulsion from the University.
Student Accessibility Services: If you have a condition that may require some classroom or exam modifications, please contact SAS (www.ssds.ualberta.ca) to obtain a
determination as to what accommodations should be made.
Student Success Centre: The Student Success Centre (www.studentsuccess.ualberta.ca) offers a variety of learning resources, including a variety of workshops in learning effective study and exam strategies. Sessions are available in person and online, for a fee.
