Dr Jorn Rothe MAR 6.13

This course is compulsory on the MSc in Management and Strategy. This course is not available as an outside option.

Students must have completed The Analysis of Strategy A (MG4A5).

The aim of this course is to build on and integrate industrial economics, game theory and management strategy to develop a framework for thinking about competition within markets and industries. Game theory provides the abstract theory of strategic interaction, and microeconomics (specifically industrial economics) provides the background on demand, production, and market structures. In this course we discuss the integration and application of these components in thinking about competitive strategy for firms in markets.

This course focuses on the strategic aspects of competing against other firms within the same industry. We start by analysing market structure and various dimensions of competition - pricing, capacity choices, research and development and advertising. We will then discuss different aspects of strategic commitment and the commitment aspects of pricing, investment and financing decisions. We then focus on the dynamic aspect of pricing rivalry, in particular collusion and price wars. We will finally discuss the incentives for innovation and market entry and exit decisions. Our approach will emphasise both the power and the limits of a game-theoretic approach. We will use simple models to clarify the logic of strategic reasoning, and case studies to illustrate the link between the analysis of strategy and managerial decision making.

20 hours of lectures and 8 hours of seminars in the LT. 2 hours of seminars in the ST.

Students on this course will have a reading week in Week 6, in line with Departmental policy.

There is no fully adequate textbook for this course.

The most important text is D Besanko, D Dranove & M Shanley and S Schaefer, The Economics of Strategy, John Wiley (6th edition, 2012). Among the other sources are:

L M B Cabral, Introduction to Industrial Organization, MIT Press (2000); P Ghemawat, Games Businesses Play: Cases and Models, MIT Press (1997); D M Kreps, Game Theory and Economic Modelling, Clarendon Press (1990); J Sutton, Technology and Market Structure, MIT Press (1998). A detailed reading list will be provided at the beginning of the course.

Exam (100%, duration: 2 hours) in the summer exam period.