# Objective

The aim of the course is to give a solid grounding in the modern empirical tools that are useful in understanding the structure of markets, and the strategic behavior of firms and their consumers.The course covers discrete choice and static demand estimation, consumer search, and static models of entry and market structure. The course also provides a hands-on introduction to MATLAB, with applications to the estimation of static demand systems and entry models.

**Grading**

Students are expected to prepare for and actively participate in all lectures and computer sessions.The grade for this course is based on presentations of assigned papers (20%), (computational) problem sets (30%) and a final home assignment (50%).

a) Presentations: Lecture material will be mainly based on those references with [*] (see below the list of topics and references). For each topic, students will make a 30–minute presentation about a randomly assigned paper related to the topic previously discussed in class.

b) Problem Sets: There will be 2 problem sets. They will entail substantial empirical and computational exercises. Students can work in groups but each student should send an individual code. Randomly selected students will be asked to discuss their problem sets’ solutions during class (i.e., codes and results).

# Planning

Meeting 1:

– Topic 1: Introduction to Structural Econometrics in IO

– Topic 2 (part 1): Static Demand Estimation

– Assignment of papers for presentations

Meeting 2:

– Topic 2 (part2): Static Demand Estimation

Meeting 3:

– Topic 2 (part3): Static Demand Estimation / Presentations

– Assignment of Problem Set 1

Meeting 4:

– Topic 3 (part 1): Static models of entry and market structure

Meeting 5:

– Topic 3 (part2): Static models of entry and market structure

Meeting 6:

– Topic 3 (part3): Static models of entry and market structure / Presentations

– Assignment of Problem Set 2

Meeting 7:

– Topic 4 (part 1): Demand and search

Meeting 8:

– Topic 4 (part 3): Demand and search / Presentations

– Assignment Take Home Exam

# Références

Papers by lecture, with * indicating main (preparatory) reading.

**Introduction to Structural Econometrics in IO**

– Ackerberg, D., C.L. Benkard, S.T. Berry, and A. Pakes (2007), "Econometric Tools for Analyzing Market Outcomes", Chapter 63 in J.J. Heckman and E. Leamer, eds., Handbook of Econometrics, vol. 6A, 4171-4276, Amsterdam: North-Holland.

* P. Reiss and F.Wolak, "Structural Econometric Modeling: Rationales and Examples from Industrial Organization," Handbook of Econometrics, Volume 6A, Chapter 64, 2007, 4277–4314, Sections 1–4.

* Aguirregabiria, V. (2012,) "Empirical Industrial Organization: Models, Methods, and Applications," Book in Progress, 1–23, Chapter 1.

– Angrist, J. and J. Pischke, "The Credibility Revolution in Empirical Economics: How Better Research Design is Taking the Con out of Econometrics," Journal of Economic Perspectives, 2010.

– Bresnahan, T. (1989), "Empirical Studies of Industries with Market Power," Handbook of Industrial Organization, vol. II, 1011-1057

– Einav, L. and Jonathan Levin (2010), "Empirical Industrial Organization: A Progress Report,"Journal of Economic Perspectives, 24(2), 145-162.

– Nevo, A. and M. Whinston (2010), "Taking the Dogma Out of Econometrics: Structural Modeling and Credible Inference," Journal of Economic Perspectives.

**Static demand estimation**

* Ackerberg, D., C.L. Benkard, S.T. Berry, and A. Pakes (2007), "Econometric Tools for Analyzing Market Outcomes," Chapter 63 in J.J. Heckman and E. Leamer, eds., Handbook of Econometrics, vol. 6A, 4171-4276, Amsterdam: North-Holland. Section 1.

– Anderson, S.P., A. De Palma, and J.-F. Thisse (1992), Discrete Choice Theory of Product Differentiation, Chapter 4, Cambridge: MIT Press.

* Berry, S.T. (1994), "Estimating Discrete-Choice Models of Product Differentiation," Rand Journal of Economics, 25(2), pp. 242-262.

* Berry, S.T., J. Levinsohn, and A. Pakes (1995), "Automobile Prices in Market Equilibrium," Econometrica, 63(July), pp. 841–990.

– Berry, S.T., J. Levinsohn, and A. Pakes (2004), "Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market," Journal of Political Economy, 112, pp. 68–105.

– Bresnahan, T. (1987), "Competition and Collusion in the American Automobile Oligopoly: The 1955 Price War," Journal of Industrial Economics, 35, pp. 457-482.

– Cardell, N.S. (1997), "Variance Components Structures for the Extreme-Value and Logistic Distributions with Applications to Models of Heterogeneity", Econometric Theory, 13(2), pp. 185–213.

– Dubé, J.-P., J.T. Fox, and C.-L. Su (2008), "Improving the Numerical Performance of BLP Structural Demand Estimators," mimeo, University of Chicago.

– Gentzkow, M. (2007), "Valuing New Goods in a Model with Complementarities: Online Newspapers," American Economic Review, 97(3), pp. 713-744.

– Gonul, F., and K. Srinivasan (1993), "Modeling Multiple Sources of Heterogeneity in Multinomial Logit Models: Methodological and Managerial Issues," Marketing Science, 12(3), pp. 213–229.

– Nevo, A. (1998), "Identification of the Oligopoly Solution Concept in a Differentiated–Products Industry," Economics Letters.

* Nevo, A. (2000), "A Practitioner’s Guide to Estimation of Random Coefficients Logit Models of Demand," Journal of Economics & Management Strategy, 9(4), pp. 513–548.

* Nevo, A. (2001), "Measuring Market Power in the Ready-to-Eat Cereal Industry," Econometrica, 69(2), 307–342.

– Nevo, A. (2011) "Empirical Models of Consumer Behavior," Annual Review of Economics.

– McFadden, D. (1974): "Conditional Logit Analysis of Qualitative Choice Behavior," in P.Zarembka (ed.), Frontiers in Econometrics, 105-142, Academic Press. New York.

* Petrin, A. (2002), "Quantifying the Benefits of New Products: The Case of the Minivan," Journal of Political Economy, 110, pp. 705–729.

– Petrin, A. and K. Train (2010), "A Control Function Approach to Endogeneity in Consumer Choice Models", Journal of Marketing Research, Vol. 47(1), pp. 3-13.

– Sovinsky, M. (2008), "Limited Information and Advertising in the U.S. Personal Computer Industry", Econometrica, Vol. 76 (5), pp.1017-1074.

– Werden, G. and L. Froeb (1994), "The Effects of Mergers in Differentiated Products Industries: Logit Demand and Merger Policy," Journal of Law, Economics, & Organization.

**Static models of entry and market structure**

– Bajari, P., H. Hong and S. Ryan, (2004) "Identification and Estimation of Discrete Games of Complete Information", Econometrica, Vol. 78(5), pp.1529-1568.

– Berry, S. (1992), "Estimation of a Model of Entry in the Airline Industry," Econometrica, Vol.60, 4, pp. 889-917.

– Berry, S., and J. Waldfogel (1999), "Free Entry and Social Inefficiency in Radio Broadcasting,"RAND Journal of Economics, Vol.30(3), pp.397-420.

– Berry, S., and P.C. Reiss (2007), "Empirical Models of Entry and Market Structure," Chapter 29 in M. Armstrong and R. Porter, eds., Handbook of Industrial Organization, vol. 3, 1845–1886, Amsterdam: North-Holland.

* Berry, S. and E. Tamer (2007): "Identification in Models of Oligopoly Entry," in Advances in Economics and Econometrics: Theory and Applications, Ninth World Congress, vol. 2, R. Blundell, W.K. Newey and T. Persson, eds., Cambridge Univ. Press.

– Bresnahan, T. and P. Reiss (1987): "Do Entry Conditions Vary across Markets?," Brookings Papers on Economic Activity: Special Issue on Microeconomics, no. 3, Martin Baily and Clifford Winston, eds., pp. 833-871.

* Bresnahan, T.F., and P.C. Reiss (1990), "Entry into Monopoly Markets", Review of Economic Studies, 57(4), pp. 531–553.

* Bresnahan, T. and P. Reiss (1991), "Econometric Models of Discrete Games," Journal of Econometrics, 48, pp. 57-81.

* Bresnahan, T. and P. Reiss (1991), "Entry and Competition in Concentrated Markets," Journal of Political Economy, 99, pp. 977–1009.

– Bresnahan, T. and P. Reiss (1994): "Measuring the Importance of Sunk Costs," Annales D’ ´ Economie et de Statistique, 31, pp. 183-217.

– Ciliberto, F. and E. Tamer (2009): "Market Structure and Multiple Equilibria in Airline Markets," Econometrica, 77(6), pp. 1791-1828.

– Einav, L. (2010), "Not All Rivals Look Alike: Estimating an Equilibrium Model of The Release Date Timing Game," Economic Inquiry, 48(2), pp. 369-390.

– Jia, P. (2008): "What Happens when Wal-Mart comes to town? Empirical Analysis of the Discount Retailing Industry," Econometrica,

– Mazzeo, M. (2002), "Product Choice and Oligopoly Market Structure," RAND Journal of Economics, 33(2), pp. 1–22.

* Schaumans, C. and F. Verboven (2008), "Entry and Regulation: Evidence from Health care Professions," RAND Journal of Economics, 39(4), pp. 949–972.

* Schaumans, C. and F. Verboven (2015), "Entry and competition in differentiated products markets," The Review of Economics and Statstics 97(1), pp. 195–209.

* Seim, K. (2006), "An Empirical Model of Firm Entry with Endogenous Product-Type Choices", RAND Journal of Economics, 37, pp. 619–640.

– Sutton, J. (1991), "Sunk Costs and Market Structure," MIT Press, chapters 1-3 and industrystudies in chapters 6, 8, 9.

– Sweeting, A. (2009): "The Strategic Timing of Radio Commercials: An Empirical Analysis Using Multiple Equilibria," RAND Journal of Economics, 40(4), Winter 2009.

– Tamer, E. (2003): "Incomplete Simultaneous Discrete Response Model with Multiple Equilibria," Review of Economic Studies, Vol. 70(1), pp. 147-165.

– Toivanen, O. and M. Waterson (2005), "Market Structure and Entry: Where’s the Beef?," RAND Journal of Economics, Vol. 36(3), pp. 680-699.

– Vitorino, M. A. (2012), "Empirical entry games with complementarities: an application to the shopping center industry," Journal of Marketing Research 49(2), pp. 175–191.

**Consumer Search and Imperfect Information**

* De los Santos, B., A. Hortacsu, and M.R.Wildenbeest (2012), "Testing Models of Consumer Search using Data onWeb Browsing and Purchasing Behavior," Americal Economic Review, Vol. 102 (6), pp. 2955-2980.

– Kim, J., P. Albuquerque, and B. Bronnenberg (2010), "Online Demand under Limited Consumer Search," Marketing Science, Vol. 29 (6), pp. 963-1169.

* Stigler, G.J. (1961), "The Economics of Information," Journal of Political Economy, 69, pp. 213–225.

* Weitzman, M.L. (1979), "Optimal Search for the Best Alternative," Econometrica, 47(3), pp. 641–654.

– Honka, E., A. Hortacsu, and M.A. Vitorino (2017), "Advertising, Consumer Awareness and Choice: Evidence from the U.S. Banking Industry," RAND Journal of Economics, Vol. 48 (3), pp. 611-646.

– Honka, E. (2014), "Quantifying search and switching costs in the U.S. Auto Insurance Industry," RAND Journal of Economics, Vol. 45 (4), pp. 847-884.