The course is self-contained (i.e. it can be done without any previous training in economics) and is thought for students of engineering, with a good mathematical background. Theory of the firm, market structure, investments, game theory are the main topics dealt with
Economia Industriale, di Luís M.B. Cabral, Carocci Editore, 2018
Besanko et al - Economia dell'industria e strategie d'impresa, isedi, sec ed, 2017
For exercises: Garavaglia C. (2006), Economia Industriale: Esercizi e Applicazioni, Carocci editore.
Harry Campbell & Richard Brown, Benefit Cost Analysis, Cambridge University Press (per ultima parte del corso)
Learning Objectives
The primary objective of the course is to provide knowledge and develop high-level skills that integrate the technological-design contents typical of engineering disciplines with a full understanding of the economic and decisional aspects of companies and institutions. To this end, methods, models and analysis tools are analyzed and discussed. We also try to give an insight into the markets in which the companies operate and the competitive strategies adopted by them.
Prerequisites
basic calculus
Teaching Methods
Lectures and exercises
Type of Assessment
written exam
Course program
The course analyses decision making at the levels of the individual firm and industry, in order to understand: (i) the levels at which capacity, output and prices are set in firms and industry; (ii) the extent to which products are differentiated; (iii) how much firms invest in research and development (R&D) (iv) how and why firms advertise and related issues. It also gives insights into how firms organise their activities, as well as considering their motivation (profit maximization versus increasing market shares etc). There is also an international dimension - firms have the option to source inputs (or outsource production) overseas: the outsourcing and offshoring decisions of firms are covered. Hence, the course covers some standard topics from micro courses, but also uses some macroeconomic concepts (such as exchange rate and foreign direct investments). Market structure is analysed in detail: competition, monopoly, imperfect competition and oligopoly are explained and the main differences and similarities between market forms are highlighted.
One of the key issues dealt with in the course is assessing whether a market is competitive. Competitive markets are normally good for consumers (and welfare analysis is also sketched) so the course also shows how to measure the extent of competition in theory and empirically (Index of Lerner, Herfindahl, degree of monopoly etc). It also considers whether/if regulation is needed, and if so the form it should take. There is again an international dimension to this, as firms that operate in more than one country are likely to face different regulatory regimes.
The course uses theoretical models to understand firm and regulatory decision making and highlights the game theoretic aspects underlying firms strategic behaviour. Special attention is given to game theory, especially Cournot, Bertrand and Stackelberg models and what changes when firms (agents) keep being on the same markets (highlighting the differences between repeated and one shot games).
The second part of the course addresses issues such as investment decisions, distinguishing between private and public investments and between situation of certainty and situation of uncertainty. Examples of cost benefit analysis for the different situations are carried out, with specific attention to problems of environmental engineering. Finally, innovation decisions are addressed: creative distruction, motivations, patterns of innovation are explored.