SYLLABUS
1. Resources |
2. Requirements |
3. Schedule
1. Resources
Prerequisites: A course in "Principles of Microeconomics" (Drake's Econ 2). Students must have a basic understanding of supply and demand.
Course description: Economic foundations, history, and recent developments in antitrust policy and economic regulation of monopolies. Emphasis on U.S. policy, with occasional comparisons to the European Union and other countries.
Who should take this course: This course counts as an elective for the following programs:
- Economics major; Quantitative Economics major; and Economics minor.
- Law, Politics, and Society major.
- Law and Business concentration (with advisor approval).
Lectures: Thursday evenings 6:00-8:50, in room 102 Aliber Hall.
How to contact instructor:
- Office: 319 Aliber Hall
- Telephone and voice mail: 271-3129
- Electronic mail: william.boal@drake.edu
- U.S. mail: College of Business and Public Administration
Drake University, 2507 University Avenue, Des Moines, Iowa 50311-4505
Office hours: Office hours are a time when you can ask questions about course material, grades, or anything related to this course or economics in general. No appointment is necessary during office hours--just drop by. Office hours this semester are posted at the instructor's web page (http://www.drake.edu/cbpa/econ/boal). If these hours are inconvenient due to schedule conflicts, please call to make a special appointment.
Course objectives: This course will explore how and why government should promote competition and restrain monopoly. In particular we will learn
- how to evaluate market performance and its impact on society using the concept of economic efficiency.
- how oligopoly and collusion among business firms affect markets and how and to what extent they can be prevented through antitrust law.
- how different kinds of mergers affect markets and to what extent they can and should be prevented through antitrust law.
- how monopolizing behavior and price discrimination affect markets and to what extent they can and should be prevented through antitrust law.
- how natural monopolies arise and how and to what extent government should respond through rate regulation, franchise bidding, and creative forms of economic regulation.
- how regulation can create inefficiencies in potentially competitive industries.
- how economic analysis can be used to understand current trends and pitfalls in deregulation.
This course will not cover environmental regulation or financial regulation. Students interested in environmental regulation should consider ENV 154 - Environmental Decision-Making. Graduate students interested in financial regulation should consider FIN 281 - Regulatory Environment of Financial Institutions.
Course resources to purchase:
- Required: W. Kip Viscusi, Joseph E. Harrington Jr., and John M. Vernon, Economics of Regulation and Antitrust, 4th edition, Cambridge, Massachusetts: MIT Press, 2005, ISBN 0-262-22075-X.
- Required: A simple calculator (capable of addition, subtraction, multiplication and division) for quizzes and exams. Graphing calculators, calculators with alphabetical keyboards, mobile phones, and wireless devices are NOT permitted during quizzes or exams.
- Recommended: Your favorite introductory microeconomics textbook, for reference.
Course resources online:
- All students must have a Drake email account (like "first.last@drake.edu"). Course announcements will occasionally be sent to this account, so each student should check it daily.
- All lecture handouts, homework assignments, and old quizzes are posted both on Blackboard (www.bb.drake.edu)
and on the course web page (www.drake.edu/cbpa/econ/boal/180). Use whichever site is more convenient. If you have difficulty accessing Blackboard, please contact the HelpDesk at 271-3001.
Internet resources on U.S. antitrust policy:
2. Requirements and grading
Course grade: Your course grade is calculated using the following formula:
SCORE = 60% x Q + 30% x F + 10% x H ,
where Q = average of weekly quiz scores (after dropping lowest score), F = final exam score, and H = average homework score. Course grades will be posted at the course web page one week after the final exam.
Weekly quizzes are closed-book, closed-notes. Simple calculators are permitted. Graphing calculators, calculators with alphabetical keyboards, mobile phones, and wireless devices are NOT permitted during quizzes or exams. The nature of the course material is cumulative, so quizzes may contain material from previous sections of the course. There will be a quiz at every class meeting (except the first), but your lowest quiz score will automatically be dropped.
Final exam is comprehensive. The final exam is required--students who do not take the final will not pass the course.
Homework: Assignments are posted both on Blackboard (www.bb.drake.edu)
and on the course web page (www.drake.edu/cbpa/econ/boal/180) with clearly specified due dates. Late homework is not accepted. If your computer is not working, please use one of the computers in Cowles Library. Computer problems are not an acceptable excuse for late homework.
Graduate credit requires an additional short paper. The topic must be chosen in consultation with the instructor. Examples of good topics include (1) a recent development in regulation, (2) a recent antitrust case, and (3) a comparison between U.S. policy and policy in some other country, such as Canada, the European Union, Japan, China, etc. The final draft of the paper is due at the final exam. For graduate students, your course grade is calculated using the following modified formula:
SCORE = 50% x Q + 25% x F + 10% x H + 15% x P ,
where P = score on short paper.
Excused absences:
- Emergencies: If your own medical emergency, or a serious illness or death in your family causes you to miss class the date a homework exercise is due or a quiz is given, you may be given an extension on a homework exercise or a makeup quiz. However, you must inform me of the emergency before class (e.g., by phone) and soon afterward submit a written explanation (including date of absence and documentation).
- Certain other circumstances are acceptable reasons for missing class the date an exam is given. These include religious observance, medical appointment, interview trip, and athletic team trip. Because these circumstances can be predicted, a written explanation (including date of absence) must be submitted before the date of absence. No extensions for any homework exercises are given in these circumstances--submit exercises early, if necessary.
Disabilities: Any student who has a physical or mental disability that substantially limits his or her ability to perform in this course under normal circumstances should contact Student Disability Services, 271-1835, to request any accommodations. Any request must be received and approved (by the instructor, among others) at least one week before the necessary accommodation. All relevant information will be kept strictly confidential.
Academic integrity: Drake University and the College of Business & Public Administration (CBPA) expect students to conduct themselves with academic integrity. The CBPA’s Academic Integrity Policy applies to this course. Cheating or plagiarism can result in a grade of zero for the test or assignment, a grade of F for the entire course, or even expulsion from the university, depending on the severity of the violation. Please read the policy and ask for clarification of any part that you do not understand.
3. Schedule of lectures and readings
All lecture handouts, homework assignments, and old quizzes are posted both on Blackboard (www.bb.drake.edu)
and on the course web page (www.drake.edu/cbpa/econ/boal/180). Use whichever site is more convenient.
I. REVIEW OF PERFECT COMPETITION
Week 1. Demand and supply [1/20]
- To do before class meeting:
- Read Viscusi, Harrington, and Vernon chapters 1 and 2 (page 30-33 and 48-51 only).
- Download and print this week's lecture handout and bring it to class.
- Topics: Government regulation of business: introduction.
Demand. Supply. Equilibrium. Math review: basic concepts and skills. Math review: percent changes. Price elasticity of demand. Price elasticity of supply. Using price elasticities.
- No quiz first class.
Week 2. Competitive firms [1/27]
- To do before class meeting:
- Download, print, and complete Homework Exercise 1, due at the beginning of class.
- No reading this week.
- Download and print this week's lecture handout and bring it to class.
- Topics: Profit maximization. Profit maximization when price is taken as given. The firm's cost in the short run. Profit maximization in the short run.
- Quiz at the end of class meeting on material from previous week.
Week 3. Welfare analysis [2/3]
- To do before class meeting:
- No reading this week.
- Download, print, and complete Homework Exercise 2, due at the beginning of class.
- Download and print this week's lecture handout and bring it to class.
- Topics: Willingness to pay and consumer surplus. Marginal cost and producer surplus. Economic efficiency. Efficiency of competitive markets. Welfare analysis of price controls.
- Quiz at the end of class meeting on material from previous week.
II. ANTITRUST POLICY
Week 4. Introduction to antitrust [2/10]
- To do before class meeting:
- Download, print, and complete Homework Exercise 3, due at the beginning of class.
- Read Viscusi, Harrington, and Vernon chapters 3 and 4.
- Download and print this week's lecture handout and bring it to class.
- Topics: Monopoly and barriers to entry. Monopoly pricing. Monopoly and social welfare. The structure-conduct-performance paradigm. Antitrust statutes and their enforcement.
- Quiz at the end of class meeting on material from previous week. Please prepare by studying old quizzes on this topic, posted on Blackboard (www.bb.drake.edu) and at the course web page (www.drake.edu/cbpa/econ/boal/180).
Week 5. Oligopoly and collusion [2/17]
- To do before class meeting:
- Download, print, and complete Homework Exercise 4, due at the beginning of class.
- Read Viscusi, Harrington, and Vernon chapter 5.
- Download and print this week's lecture handout and bring it to class.
- Topics: Basic game theory. The Cournot model. The Cournot firm's marginal revenue. Cournot duopoly. Cournot oligopoly. Cournot versus price competition. Joint profit maximization (collusion). Cheating in a cartel. Antitrust law on price fixing.
- Quiz at the end of class meeting on material from previous week. Please prepare by studying old quizzes on this topic, posted on Blackboard (www.bb.drake.edu) and at the course web page (www.drake.edu/cbpa/econ/boal/180).
Week 6. Antitrust policy on market structure [2/24]
- To do before class meeting:
- Download, print, and complete Homework Exercise 5, due at the beginning of class.
- Read Viscusi, Harrington, and Vernon chapter 6.
- Download and print this week's lecture handout and bring it to class.
- Topics: Measuring industry concentration. Concentration and profits. Scale economies. Entry costs and equilibrium entry. Entry barriers and contestable markets. Dominant-firm price-leadership. Preventing entry.
- Quiz at the end of class meeting on material from previous week. Please prepare by studying old quizzes on this topic, posted on Blackboard (www.bb.drake.edu) and at the course web page (www.drake.edu/cbpa/econ/boal/180).
Week 7. Antitrust policy on horizontal mergers [3/3]
- To do before class meeting:
- Topics: Mergers. Motivations for horizontal mergers. Important horizontal merger cases. Horizontal merger enforcement today. Conglomerate mergers.
- Quiz at the end of class meeting on material from previous week. Please prepare by studying old quizzes on this topic, posted on Blackboard (www.bb.drake.edu) and at the course web page (www.drake.edu/cbpa/econ/boal/180).
Week 8. Antitrust policy on vertical mergers and vertical restrictions [3/10]
- To do before class meeting:
- Topics: Vertical mergers and transaction costs. Successive monopolies and double marginalization. Monopoly extension. Foreclosure. Vertical restraints. Tying.
- Quiz at the end of class meeting on material from previous week. Please prepare by studying old quizzes on this topic, posted on Blackboard (www.bb.drake.edu) and at the course web page (www.drake.edu/cbpa/econ/boal/180).
Spring Recess--no class [3/17]
Week 9. Antitrust policy on monopolization and price discrimination [3/24]
- To do before class meeting:
- Download, print, and complete Homework Exercise 8, due at the beginning of class.
- Read Viscusi, Harrington, and Vernon chapter 9.
- Download and print this week's lecture handout and bring it to class.
- Topics: Monopolization: power and intent. Important monopolization cases. Predatory pricing. Reputation models of predatory pricing. Law and policy on predatory pricing. Refusal to deal. U.S. versus Microsoft. Price discrimination: introduction. Market-segmenting price discrimination. Law and policy on price discrimination.
- Quiz at the end of class meeting on material from previous week. Please prepare by studying old quizzes on this topic, posted on Blackboard (www.bb.drake.edu) and at the course web page (www.drake.edu/cbpa/econ/boal/180).
III. ECONOMIC REGULATION
Week 10. Introduction to economic regulation [3/31]
- To do before class meeting:
- Download, print, and complete Homework Exercise 9, due at the beginning of class.
- Read Viscusi, Harrington, and Vernon chapter 10, and chapter 11 through page 418.
- Download and print this week's lecture handout and bring it to class.
- Topics: Brief history of regulation in the U.S. Theories of regulation. Economic theories of regulation. Natural monopoly. Pricing with economies of scale. Multipart tariffs. Ramsey pricing.
- Quiz at the end of class meeting on material from previous week. Please prepare by studying old quizzes on this topic, posted on Blackboard (www.bb.drake.edu) and at the course web page (www.drake.edu/cbpa/econ/boal/180).
Week 11. Regulation of electric power [4/7]
- To do before class meeting:
- Download, print, and complete Homework Exercise 10, due at the beginning of class.
- Read Viscusi, Harrington, and Vernon chapter 12.
- Download and print this week's lecture handout and bring it to class.
- Topics: Traditional rate-of-return regulation. Incentive regulation. Common costs and joint costs. Peak-load pricing in theory. Peak-load pricing in practice: electric power. Markets for wholesale electric power. The California energy crisis of 2000-01. Market power in wholesale power markets.
- Quiz at the end of class meeting on material from previous week. Please prepare by studying old quizzes on this topic, posted on Blackboard (www.bb.drake.edu) and at the course web page (www.drake.edu/cbpa/econ/boal/180).
Week 12. Franchise bidding and government enterprise [4/15]
- To do before class meeting:
- Download, print, and complete Homework Exercise 11, due at the beginning of class.
- Read Viscusi, Harrington, and Vernon chapters 13 and 14.
- Download and print this week's lecture handout and bring it to class.
- Topics: Franchise bidding. Cable TV franchising. Cable TV regulation. Public enterprise.
- Quiz at the end of class meeting on material from previous week. Please prepare by studying old quizzes on this topic, posted on Blackboard (www.bb.drake.edu) and at the course web page (www.drake.edu/cbpa/econ/boal/180).
Week 13. Regulation and deregulation of telecommunications [4/21]
- To do before class meeting:
- Download, print, and complete Homework Exercise 12, due at the beginning of class.
- Read Viscusi, Harrington, and Vernon chapter 15.
- Download and print this week's lecture handout and bring it to class.
- Topics: Beginnings of telephony. Deregulation of customer premises equipment. Transformation of natural monopoly. Deregulation of long-distance telecommunications. Breaking up AT&T. Telecommunications deregulation since 1984.
- Quiz at the end of class meeting on material from previous week. Please prepare by studying old quizzes on this topic, posted on Blackboard (www.bb.drake.edu) and at the course web page (www.drake.edu/cbpa/econ/boal/180).
Week 14. Regulation and deregulation of transportation [4/28]
- To do before class meeting:
- Download, print, and complete Homework Exercise 13, due at the beginning of class.
- Read Viscusi, Harrington, and Vernon chapters 16 and 17.
- Download and print this week's lecture handout and bring it to class.
- Topics: Effects of regulation in competitive markets. Indirect effects of regulation. Measuring the effects of regulation. Regulation of railroads and trucking. Effects of deregulation of railroads and trucking. Regulation of airlines. Effects of deregulation of airlines.
- Quiz at the end of class meeting on material from previous week. Please prepare by studying old quizzes on this topic, posted on Blackboard (www.bb.drake.edu) and at the course web page (www.drake.edu/cbpa/econ/boal/180).
IV. REGULATION OF HEALTH AND SAFETY
Week 15. Introduction to health and safety regulation [5/5]
- To do before class meeting:
- Download, print, and complete Homework Exercise 14, due at the beginning of class.
- Read Viscusi, Harrington, and Vernon chapters 19 and 20.
- Download and print this week's lecture handout and bring it to class.
- Topics: Health and safety regulation. Value of a statistical life. Measuring VSL from data. Other ways to measure value of policy effects. Health and safety regulatory decisions.
- Quiz at the end of class meeting on material from previous week. Please prepare by studying old quizzes on this topic, posted on Blackboard (www.bb.drake.edu) and at the course web page (www.drake.edu/cbpa/econ/boal/180).
FINAL EXAM [5/12]
[end of syllabus]