Global Firms and Markets
A.Y. 2019/2020
Learning objectives
The course aims at providing the students with a clear understanding of the following issues:
Part 1
- Economic Theory of the firm - economics and organization principles- control and decision within firms.
- Market failures and imperfections. Market power and pricing. Monopoly, oligopoly, entry, product differentiation, R&D and innovation.
- Game theoretic concepts and applications to competition analysis. Rview and applications of Game Theory.
- Oligopoly price and non-price competition.
Part 2
· Key features of firms in developing countries
· Role of institutions, markets, infrastructure and finance in determining the performance of firms in developing countries
· How behavioral factors and social norms interact with economic determinants of firm outcomes
. Methods for the evaluation of the impact of policy interventions
Part 1
- Economic Theory of the firm - economics and organization principles- control and decision within firms.
- Market failures and imperfections. Market power and pricing. Monopoly, oligopoly, entry, product differentiation, R&D and innovation.
- Game theoretic concepts and applications to competition analysis. Rview and applications of Game Theory.
- Oligopoly price and non-price competition.
Part 2
· Key features of firms in developing countries
· Role of institutions, markets, infrastructure and finance in determining the performance of firms in developing countries
· How behavioral factors and social norms interact with economic determinants of firm outcomes
. Methods for the evaluation of the impact of policy interventions
Expected learning outcomes
Part 1
The student will acquire the necessary tools for describing the various economic issues and problems related to (i) markets where firms have market power, (ii) the internal organization of single firms. The course will also increase the ability to perform analytical tasks such as: setting up a model of competitive behavior appropriate to real world situations; finding a prediction about the market outcome; evaluate and appraise its welfare and policy implications. The student shall also be able to critically evaluate Antitrust cases and regulatory issues that are treated by European as well as by national authorities. The ability to interpret mathematical models used in social sciences will be enhanced, as well as the ability to summarize rigorously, and in a simplified way, the intricate consequences of policy actions. Finally, the student will improve the mastering of analytical tools necessary to access the scientific literature.
Part 2
Beside learning about the key institutional, market, infrastructural and social constraints faced by firms in developing countries, students will acquire a set of skills that will be useful for their future, both within and outside academia. The focus of the course on methodological aspects will help students acquire the ability to critically evaluate claims of causality and assess the impact of policy interventions. Moreover, the assignment for the course consists in writing a referee report for a recent working paper in the field of development economics. This exercise will improve students' ability to read critically an academic article, will give them the opportunity to practice their writing skills, and will inform their future thesis work by encouraging to think in depth about a topic of their choosing within the course curriculum.
The student will acquire the necessary tools for describing the various economic issues and problems related to (i) markets where firms have market power, (ii) the internal organization of single firms. The course will also increase the ability to perform analytical tasks such as: setting up a model of competitive behavior appropriate to real world situations; finding a prediction about the market outcome; evaluate and appraise its welfare and policy implications. The student shall also be able to critically evaluate Antitrust cases and regulatory issues that are treated by European as well as by national authorities. The ability to interpret mathematical models used in social sciences will be enhanced, as well as the ability to summarize rigorously, and in a simplified way, the intricate consequences of policy actions. Finally, the student will improve the mastering of analytical tools necessary to access the scientific literature.
Part 2
Beside learning about the key institutional, market, infrastructural and social constraints faced by firms in developing countries, students will acquire a set of skills that will be useful for their future, both within and outside academia. The focus of the course on methodological aspects will help students acquire the ability to critically evaluate claims of causality and assess the impact of policy interventions. Moreover, the assignment for the course consists in writing a referee report for a recent working paper in the field of development economics. This exercise will improve students' ability to read critically an academic article, will give them the opportunity to practice their writing skills, and will inform their future thesis work by encouraging to think in depth about a topic of their choosing within the course curriculum.
Lesson period: First trimester
Assessment methods: Esame
Assessment result: voto verbalizzato in trentesimi
Single course
This course cannot be attended as a single course. Please check our list of single courses to find the ones available for enrolment.
Course syllabus and organization
Single session
Responsible
Lesson period
First trimester
Course syllabus
Parte 1.
Review of perfect competition and Pareto efficiency. Monopoly pricing. Monopoly quality choice. Theory of the firm, neoclassical, Coase, and Grossman and Hart. Incentives in Principal-Agent relationship. Oligopoly models. Welfare properties and policy issues in Cournotian models. Product differentiation. Collusion and Antitrust. Innovation, R&D, and Patent policy.
Part 2
Topic 1 - Intro, Development Accounting and Growth Models: We review key results of the development accounting literature and classic structural transformation models. We examine mechanisms of structural transformation and focus on structural transformation at the firm level.
Topic 2 - Institutions: We discuss the role of institutions in determining investment and productivity. In particular, we will focus on property rights and contract enforcement; corruption and distortions; taxation and entry regulations. When looking at entry barriers and taxes, we will discuss the roots of informality.
Topic 3 - Entrepreneurship and Development: We discuss the basic features of firms in developing countries. We review the evidence on return to capital, ask how market imperfections may limit enterprise growth, and review the micro-level evidence on constraints for firm growth in developing countries.
Topic 4 - Credit Markets in Developing Countries: Financial markets play a crucial role in economic development by allowing those who have talent or skills but limited money to undertake investments. We review theories on how financial market frictions may affect choices and productivity of individuals and firms. We look at evidence on the importance of financial market frictions in developing countries.
Topic 5 - Microfinance: How does the standard microfinance model work, and how did microfinance make lending to the poor a viable and sustainable policy? What is the impact of microfinance on business development and poverty alleviation? How can we improve the access to financial services and increase savings among poor households? What is the role of complementary skills, social networks, cultural and psychological factors?
Topic 6 - Insurance: Risk plays a crucial role in the lives of the poor. We'll review evidence on the determinants of and constraints to insurance take up and the impact of insurance on firms.
Topic 7 - Infrastructure: Access to infrastructure, such as transport, energy and more recently internet, is an important determinant of firm productivity. Studies of developing country settings allow to evaluate and quantify the impact of infrastructure on firms.
Topic 8 - Productivity: What are the drivers of forms productivity in developing countries? What is the role of management? We review the recent literature on management practices and productivity. We then discuss the role of complementarity inputs, institutional quality and relational contracts in determining firms' productivity.
Topic 9 - Intra-household norms and behavioral issues: Given that much of production in developing countries occurs within the household, it is important to understand how intra-household decisions are made in order to explain firm productivity. Similarly, behavioral issues are particularly binding for the poor, and are another key determinant of entrepreneurs' behavior.
Topic 10 - Empirical methods: The impact evaluation problem and its solutions. Informal overview of empirical methods and their application to development economics papers on firms. This is a cross-cutting topic, which will be primarily covered during the classes.
Review of perfect competition and Pareto efficiency. Monopoly pricing. Monopoly quality choice. Theory of the firm, neoclassical, Coase, and Grossman and Hart. Incentives in Principal-Agent relationship. Oligopoly models. Welfare properties and policy issues in Cournotian models. Product differentiation. Collusion and Antitrust. Innovation, R&D, and Patent policy.
Part 2
Topic 1 - Intro, Development Accounting and Growth Models: We review key results of the development accounting literature and classic structural transformation models. We examine mechanisms of structural transformation and focus on structural transformation at the firm level.
Topic 2 - Institutions: We discuss the role of institutions in determining investment and productivity. In particular, we will focus on property rights and contract enforcement; corruption and distortions; taxation and entry regulations. When looking at entry barriers and taxes, we will discuss the roots of informality.
Topic 3 - Entrepreneurship and Development: We discuss the basic features of firms in developing countries. We review the evidence on return to capital, ask how market imperfections may limit enterprise growth, and review the micro-level evidence on constraints for firm growth in developing countries.
Topic 4 - Credit Markets in Developing Countries: Financial markets play a crucial role in economic development by allowing those who have talent or skills but limited money to undertake investments. We review theories on how financial market frictions may affect choices and productivity of individuals and firms. We look at evidence on the importance of financial market frictions in developing countries.
Topic 5 - Microfinance: How does the standard microfinance model work, and how did microfinance make lending to the poor a viable and sustainable policy? What is the impact of microfinance on business development and poverty alleviation? How can we improve the access to financial services and increase savings among poor households? What is the role of complementary skills, social networks, cultural and psychological factors?
Topic 6 - Insurance: Risk plays a crucial role in the lives of the poor. We'll review evidence on the determinants of and constraints to insurance take up and the impact of insurance on firms.
Topic 7 - Infrastructure: Access to infrastructure, such as transport, energy and more recently internet, is an important determinant of firm productivity. Studies of developing country settings allow to evaluate and quantify the impact of infrastructure on firms.
Topic 8 - Productivity: What are the drivers of forms productivity in developing countries? What is the role of management? We review the recent literature on management practices and productivity. We then discuss the role of complementarity inputs, institutional quality and relational contracts in determining firms' productivity.
Topic 9 - Intra-household norms and behavioral issues: Given that much of production in developing countries occurs within the household, it is important to understand how intra-household decisions are made in order to explain firm productivity. Similarly, behavioral issues are particularly binding for the poor, and are another key determinant of entrepreneurs' behavior.
Topic 10 - Empirical methods: The impact evaluation problem and its solutions. Informal overview of empirical methods and their application to development economics papers on firms. This is a cross-cutting topic, which will be primarily covered during the classes.
Prerequisites for admission
Propaedeutical exams: Optimization, Research Methods, Game Theory.
Teaching methods
Part 1: Lectures and exercise sessions.
Part 2: Lectures with slides, where the topics will be discussed. Weekly classes, where specific papers, methodology and writing skills will be covered.
Part 2: Lectures with slides, where the topics will be discussed. Weekly classes, where specific papers, methodology and writing skills will be covered.
Teaching Resources
Parte 1 (Prof. Garella)
Tirole: Theory of Industrial Organization, MIT Press, 1988.
Pepall L., Richard D., Norman G.: Industrial Organization: Contemporary Theory and Practice, Wiley 2014.
Church J. and R. Ware: Industrial Organization: A Strategic Aprroach. MacGrawHill 2000.
Parte 2 (Prof. d'Adda)
PROF. D'ADDA
Textbooks and Reading:
There is no required textbook for the course. The main study material are slides and academic papers. Three useful books are:
· Ray, D. Development Economics. Princeton: Princeton University Press, 2008.
· Banerjee, A. V. and E. Duflo. Poor Economics. New York: Public Affairs, 2011.
· Mullainathan, S. and E. Shafir. Scarcity. Henry Holt and Company, 2013.
Selected chapters of these books will be assigned as recommended reading for the relevant week's topic.
In addition, articles from academic journals will be assigned as required or recommended reading and reviewed in the lectures and classes.
The detailed course calendar and the lecture slides on Ariel contain all the information on required readings for each lecture.
Tirole: Theory of Industrial Organization, MIT Press, 1988.
Pepall L., Richard D., Norman G.: Industrial Organization: Contemporary Theory and Practice, Wiley 2014.
Church J. and R. Ware: Industrial Organization: A Strategic Aprroach. MacGrawHill 2000.
Parte 2 (Prof. d'Adda)
PROF. D'ADDA
Textbooks and Reading:
There is no required textbook for the course. The main study material are slides and academic papers. Three useful books are:
· Ray, D. Development Economics. Princeton: Princeton University Press, 2008.
· Banerjee, A. V. and E. Duflo. Poor Economics. New York: Public Affairs, 2011.
· Mullainathan, S. and E. Shafir. Scarcity. Henry Holt and Company, 2013.
Selected chapters of these books will be assigned as recommended reading for the relevant week's topic.
In addition, articles from academic journals will be assigned as required or recommended reading and reviewed in the lectures and classes.
The detailed course calendar and the lecture slides on Ariel contain all the information on required readings for each lecture.
Assessment methods and Criteria
Part 1 (Prof. Garella)
Written exam. Multiple choice questions and exercises. Counts for 50% of the final mark. More information are available in the course webpage in ARIEL.
Part 2. (Prof. d'Adda)
As for part 1, the exam counts for 50% of the final grade. Written exam. The exam will include a part with multiple-choice questions and a part with open questions and/or exercises. Students will have the opportunity to write a group report of an academic paper, which will replace one of the open questions/exercises of the exam: that is, students who choose to submit a report will only have to answer one of the open questions, at their choosing, in the exam. This opportunity will be valid only in the first 3 exam sessions.
More information are available in the course webpage in ARIEL.
Written exam. Multiple choice questions and exercises. Counts for 50% of the final mark. More information are available in the course webpage in ARIEL.
Part 2. (Prof. d'Adda)
As for part 1, the exam counts for 50% of the final grade. Written exam. The exam will include a part with multiple-choice questions and a part with open questions and/or exercises. Students will have the opportunity to write a group report of an academic paper, which will replace one of the open questions/exercises of the exam: that is, students who choose to submit a report will only have to answer one of the open questions, at their choosing, in the exam. This opportunity will be valid only in the first 3 exam sessions.
More information are available in the course webpage in ARIEL.
SECS-P/08 - MANAGEMENT - University credits: 12
Lessons: 80 hours
Professors:
D'Adda Giovanna, Garella Paolo
Shifts:
Professor(s)
Reception:
Tuesday 9:30-12:30. Preferably, students are requested to set an appointment by email. Otherwise, they can send an email or a message on Teams during the office hours to check availability.
Room 219, Via Livorno