Industrial Organization

Examining how firms compete, collude, innovate, and grow in real-world markets, this course analyzes how these strategic choices shape consumer welfare and public policy. Using the tools of microeconomics and industrial organization, students assess firm behaviour across market structures ranging from competitive industries to monopolies and oligopolies.

A defining feature is the case-driven approach. Theoretical models are applied to high-profile, policy-relevant cases including airline price wars and mergers (IndiGo, American-US Airways), cartel behaviour and tacit collusion (De Beers, GE-Westinghouse), controversial pricing practices (Spirit Airlines, the Pink Tax), innovation and dominance in technology markets (Microsoft, Apple Watch), and network-driven platforms in emerging economies (IndiaMART).

Organized into four parts, the course opens with foundational tools for understanding consumer demand, firm pricing, efficiency, and market failure. The second part covers strategic interaction under oligopoly, introducing game theory and models of competition, collusion, and price wars. The third examines how industry structure evolves through entry barriers, mergers, foreclosure, and government intervention. The final part explores nonprice strategies (vertical integration, advertising, innovation, and networks) central to competition in digital and platform-based markets.

Instruction combines flipped-classroom discussions, data-driven group assignments, and applied case analysis.

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Learning Objectives

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By the end of the course, students will be able to:

• Analyze real-world market structures and firm strategies: Use industrial organization models to evaluate how firms set prices, choose capacity, enter markets, and respond to rivals across competitive, monopolistic, and oligopolistic settings, drawing on cases from airlines, consumer goods, and technology markets.
• Apply game theory to strategic interaction and competition: Interpret and predict firm behavior in settings involving collusion, price wars, tacit coordination, and strategic commitment, using formal models alongside cases such as cartels, airline competition, and repeated interaction among dominant firms.
• Evaluate controversial pricing and market practices: Assess price discrimination, bundling, exclusive contracts, and foreclosure strategies using both economic theory and empirical evidence from cases like Spirit Airlines’ fee structures, the Pink Tax, and Mars–Unilever exclusivity.
• Critically assess mergers, innovation, and market power: Analyze horizontal and vertical mergers, innovation strategies, and dominance in fast-changing industries, with attention to failed and contested mergers (GE–Honeywell, AA–US Airways) and innovation-driven competition in technology markets.
• Understand the role of public policy and regulation in shaping markets: Evaluate when and how government intervention—antitrust enforcement, regulation, and subsidy policy—can improve market outcomes, using real regulatory cases from both developed and emerging economies.
• Synthesize theory, data, and case evidence to make policy and strategy arguments: Combine formal models, empirical analysis, and case-based reasoning to construct clear, evidence-backed arguments about competition, consumer welfare, and firm strategy in contemporary markets.

• Cabral, LM, 2017. Introduction to Industrial Organization (2nd Edition). MIT press.
• Harvard Business cases (and readings) will be provided separately
• Mini Case studies: http://luiscabral.net/economics/teaching/

All the case studies (main and mini) and readings (except the textbook) will be made available on Moodle.

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