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My IO reading list
This is for my Ph.d. class and I've put it beneath the fold. Can you guess who teaches IO, Part II? Hint: it is someone I find it easy to coordinate with and he will be covering price discrimination, among other topics. Click here to get to the list...
Industrial Organization I, Tyler Cowen (x2312, 4910), tcowen@gmu.edu
BOOKS:
Gordon, John Steele – An Empire of Wealth: An Epic History of American Economic Power
Lowenstein, Roger – When Genius Failed: The Rise and Fall of Long-Term Capital Management
METHODS OF EVALUATION:
There will be weekly quizzes, a midterm, and a final exam.
READINGS:
I. The Firm
Holmstrom, Bengt and Tirole, Jean. “The Theory of the Firm,” in Handbook of Industrial Economics, vol.I.
Rotemberg, Julio. “A Theory of Inefficient Intrafirm Transactions.” American Economic Review (March 1991).
Holmstrom, Bengt and Roberts, John. “The Boundaries of the Firm Revisisted.” Journal of Economic Perspectives 12, 4 (Fall 1998): 73-94.
Demsetz, Harold and Lehn, Kenneth. “The Structure of Corporate Ownership: Causes and Consequences.” Journal of Political Economy 93 (December 1985): 1155-1177.
Gibbons, Robert. “Incentives in Organizations.” Journal of Economic Perspectives (Fall 1998): 115-132.
Chapters from Discover Your Inner Economist, by Tyler Cowen.
Montgomery, Cynthia. “Corporate Diversification,” Journal of Economic Perspectives (Summer 1994): 163-178.
Rasmusen, Eric. “Mutual Banks and Stock Banks.” Journal of Law and Economics 31 (1988): 395-422.
Hansemann, Henry. “Ownership of the Firm,” Journal of Law, Economics and Organization (Fall 1988).
Hansemann, Henry. “The Role of Non-Profit Enterprise.” Yale Law Journal (1980): 835-901.
Cowen, Tyler. “Response to David Friedman,” Economics and Philosophy, at http://www.gmu.edu/jbc/Tyler/TYLER.doc.
Xavier Gabaix and David Laibson, “Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets,” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=728545.
Glenn Ellison, “Bounded rationality in Industrial Organization,” http://cemmap.ifs.org.uk/papers/vol2_chap5.pdf
II. Capital structure and control
Miller, Merton, and commentators. “The Modigliani-Miller Propositions After Thirty Years,” and comments, Journal of Economic Perspectives (Fall 1988): 99-158.
Myers, Stewart. “Capital Structure.” Journal of Economic Perspectives (Spring 2001): 81-102.
Hart, Oliver. “Financial Contracting.” Journal of Economic Literature (December 2001): 1079-1100.
Easterbrook, Frank H. “Two Agency-Cost Explanations of Dividends.” American Economic Review (September 1984).
Fudenberg, Drew and Tirole, Jean. “A Theory of Income and Dividend Smoothing.” Journal of Political Economy (February 1995): 75-93.
Baker, Malcolm and Wurgler, Jeffrey. “A Catering Theory of Dividends,” Journal of Finance (2004), available at http://pages.stern.nyu.edu/~jwurgler/.
Baker, Malcolm and Ruback, Richard. “Behavioral Corporate Finance: A Survey,” found at http://www.wcfia.harvard.edu/seminars/pegroup/BakerRubackWurgler.pdf
MacKinlay, A.C. (1997), “Event Studies in Economics and Finance”, Journal of
Economic Literature 35(1), 13-39.
“Symposium on Takeovers,” edited by Hal Varian, Journal of Economic Perspectives (Winter 1988): 1-82.
Andrade, Gregor, et. al. “New Evidence and Perspective on Mergers.” Journal of Economic Perspectives (Spring 2001): 103-120.
Holmstrom, Bengt and Kaplan, Steven. “Corporate Governance and Merger Activity in the United States,” Journal of Economic Perspectives (Spring 2001): 121-149.
Gompers, Paul and Lerner, Josh. “The Venture Capital Revolution.” Journal of Economic Perspectives (Spring 2001): 145-168.
Stein, Jeremy C. “Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate Behavior.” Quarterly Journal of Economics 104 (November 1989): 655-670.
Stein, Jeremy C. “Takeover Threats and Managerial Myopia.” Journal of Political Economy (1988): 61-80.
Scharfstein, David S. and Stein, Jeremy C. “Herd Behavior and Investment.” American Economic Review 80 (June 1990): 465-479.
Hall, Brian and Murphy, Kevin J, “The Trouble with Stock Options,” Journal of Economic Perspectives, Summer 2003, also at http://www-rcf.usc.edu/~kjmurphy/HMTrouble.pdf.
Murphy, Kevin J. and Zaboznik, Jan. “CEO Pay and Appointments,” American Economic Review, May 2004, also at http://www-rcf.usc.edu/~kjmurphy/CEOTrends.pdf
Jensen, Michael, Murphy, Kevin J., and Eric Wruck. “Remuneration: Where We've Been, How We Got to Here, What are the Problems, and How to Fix Them,” available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=561305#PaperDownload.
Robert J. Gordon and Ian Dew-Becker, “Unresolved Issues in the Rise of American Inequality,” http://www.people.fas.harvard.edu/~idew/papers/BPEA_final_ineq.pdf
III. Vertical control, antitrust, and related issues.
Tirole, Jean. “Vertical Control.” In Theory of Industrial Organization, Chapter 4.
Klein, Benjamin and Leffler, Keith. “The Role of Market Forces in Assuring Contractual Performance.” Journal of Political Economy 89 (1981): 615-641.
Klein, Benjamin and Murphy, Kevin. “Vertical Restraints as Contract Enforcement Mechanisms,” Journal of Law and Economics (October 1988).
Breit, William. “Resale Price Maintenance: What do Economists Know and When Did they Know It?” Journal of Institutional and Theoretical Economics (1991).
Bernheim, R. Doug and Whinston, Michael. “Exclusive Dealing.” Journal of Political Economy (February 1998): 64-103.
Rasmusen, Ramseyer and Wiley, 1991, “Naked Exclusion,” American Economic Review, 1137-45.
Bittlingmayer, George. “Decreasing Average Cost and Competition: A New Look at the Addyston Pipe Case,” Journal of Law and Economics (October 1982).
Klein, Benjamin, and Kenney, Roy. “The Economics of Block Booking,” Journal of Law and Economics, (1983), 27, 3, 497-540.
Tirole, Jean. “Information and Strategic Behavior: Reputation, Limit Pricing, and Predation.” In Theory of Industrial Organization, Chapter 9.
Timothy Bresnahan, “Empirical Studies of Industries with Concentrated Power,” Handbook of Industrial Organization, vol.II.
Pakes, Ariel. “Theory and Empirical Work on Imperfectly Competitive Markets,” NBER Working Paper 14117, June 2008.
Sproul, Michael. “Antitrust and Prices.” Journal of Political Economy (August 1993): 741-754.
McCutcheon, Barbara. “Do Meetings in Smoke-Filled Rooms Facilitate Collusion?” Journal of Political Economy (April 1997): 336-350.
Hazlett, Thomas W. “Is Antitrust Anticompetitive?” Harvard Journal of Law and Public Policy, (Spring 1986).
Crandall, Robert and Whinston, Clifford, “Does Antitrust Improve Consumer Welfare?: Assessing the Evidence,” Journal of Economic Perspectives (Fall 2003 ), 3-26, available at http://www.brookings.org/views/articles/2003crandallwinston.htm.
IV. Theory and Regulation of Natural Monopolies
Sanford Berg and John Tschirhart, Natural Monopoly Regulation, Cambridge University Press.
pp. 21-275.
Demsetz, Harold. “Why Regulate Utilities?” Journal of Law and Economics (April 1968): 347-359.
Williamson, Oliver. “Franchise Bidding for Natural Monopolies - in General and with Respect to CATV.” Bell Journal of Economics (Spring 1976): 73-104.
Crandall, Robert W. “An End to Economic Regulation?” available at http://www.brookings.org/views/papers/crandall/20030721.pdf.
Parente, Stephen L. and Prescott, Edward. “Monopoly Rights: A Barrier to Riches.” American Economic Review 89, 5 (December 1999): 1216-1233.
Shleifer, Andrei. “State vs. Private Ownership.” Journal of Economic Perspectives (Fall 1998): 133-151.
Berg and Tschirhart, pp. 480-522.
Associated other topics in regulation, depending on your interests; reading suggestions will follow later in the semester.
Posted by Tyler Cowen on August 27, 2008 at 01:43 PM in Economics | Permalink
Comments
Very interesting list, and I think quite unusual for an IO class.
It seems especially light on the structural stuff most IO people seem to be doing today. I am not very fond of it (mostly because of very dubious identifying assumptions and over-reliance on the underlying model), but it may be a good idea to give your students a better idea what's seen as cutting edge IO by the field. You may be planning to have the structural papers covered in Part II.
Posted by: Commenterlein at Aug 27, 2008 2:49:20 PM
"Can you guess who teaches IO, Part II?"
Tyrone?
Posted by: Kevin Postlewaite at Aug 27, 2008 3:17:09 PM
Tyler, you didn't ask for comments and suggestions, but I'll make some anyway. You have some great stuff here, but some of the readings in Parts I and III are a little dated -- not classics, like Coase (1937) or Alchian and Demsetz (1972) or Williamson (1975) or Klein, Crawford, and Alchian (1978), but not cutting-edge either.
On the firm:
* The papers from the 1998 JEP symposium are excellent, but even better is Bob Gibbons's "Four Formal(izable) Theories of the Firm?" JEBO, October 2005.
* Holmstrom and Tirole is an OK introduction to the modern theory of the firm, but the first few chapters from Oliver Hart's 1995 book are better.
* Hansmann has a newer paper that covers the same ground as his 1988 paper but much new material too: "Law and the Rise of the Firm" (with Reinier Kraakman and Richard Squire), Harvard Law Review, 2006. Or, slightly more introductory: "Organizational Law as Asset Partitioning" (with Kraakman), European Economic Review, 2000.
* Cynthia Montgomery's 1994 survey is way out of date. The last ten years have completely reversed the conventional wisdom on diversification by taking endogeneity and selection bias into account. For an overview see the 2003 symposium edited by Belen Villalonga at http://ssrn.com/abstract=402220.
On vertical integration, the best introduction is Paul Joskow's chapter in the Handbook of New Institutional Economics (Springer, 2005). Much better than the Tirole chapter from the 1989 Handbook of IO, which gives short shrift to the (dominant) transaction cost appraoch. Indeed, you don't seem to have anything on relationship-specific investments, relational contracting, or the other contemporary approaches to vertical relationships.
Posted by: Peter G. Klein at Aug 27, 2008 4:28:34 PM
No Eric Maskin? Heresy!
Posted by: Mike Moffatt at Aug 27, 2008 4:42:29 PM
I know it has been decades since I was in a university environment, but weekly quizzes for PhD level students?
Is this normal?
Posted by: spencer at Aug 27, 2008 4:57:43 PM
I would in particular second Peter Klein's suggestion
regarding Bob Gibbons's "Four formalizable theories of
the firm," (which I published). It is rapidly becoming
the new standard on this stuff.
Posted by: Barkley Rosser at Aug 27, 2008 5:19:36 PM
Well, I have read exactly one of those papers/chapters carefully, and it is Exclusive Dealing by Bernheim and Whinston. I didn't think it was particularly good or insightful.
Thanks for the reading list. It should be pretty useful as I am beginning the search for a dissertation topic in the field of IO.
Posted by: Aaron Fix at Aug 27, 2008 7:35:14 PM
I'm distressed that you're recommending "When Genius Failed", an uninformative piece of middlebrow journalism.
If you want to give your class a serious account of the collapse of LTCM, you should ask them to read "Inventing Money" by Nicholas Dunbar. It does a better job of explaining the revolution in financial economics back story, provides much more hard detail on LTCM's trades and its relationships wih other financial institutions, and gives a better account of the implosion and Fed-orchestrated clean-up.
"When Genius Failed" is not a book for grown-ups, and "Inventing Money" is.
Posted by: Oliver Rivers at Aug 28, 2008 4:10:13 AM
Is it possible to paste a word document as well? When I print it, the banners make the document much longer and when I copy it to a word document, I cannot make the text any wider for some reason.
Thanks.
Posted by: John at Aug 28, 2008 9:19:18 AM
Awesome. I wish more of my undergrad class reading lists had been download-able for free with a JSTOR account. Peter, I read a lot of your suggestions in an undergrad Theory Of The Firm class, which may be an assumed prerequisite for this class. I don't know.
Posted by: d.cous. at Aug 28, 2008 11:37:52 AM
definitely light on the structural stuff.
Posted by: adamh at Aug 28, 2008 1:33:24 PM
