Industrial Economics (Econ3400) Week 1 July 24, 2008 Room 323, Bldg 3 Semester 2, 2008 Instructor: Dr Shino Takayama.

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Presentation transcript:

Industrial Economics (Econ3400) Week 1 July 24, 2008 Room 323, Bldg 3 Semester 2, 2008 Instructor: Dr Shino Takayama

Agenda for Week 1 Course Profile (Syllabus) Introduction to I.O. Profit Maximization & Perfect Competition Efficiency

The Instructor ? Name: Shino (McLennan) Takayama Hometown: Osaka/Kyoto, Japan Ph.D in Economics from U MN, USA Arrival in AU: September, 2005 Moved from Sydney Uni. Financial Economics, Game Theory, Public Economics Website: Office: Clark Office Hour: 11:00 – 12:00, Mondays

Econ3400 Industrial Economics Textbook: hurch/page4/page5/files/PostedIOS A.pdf Course Description: The main objective of the lectures is to present applied topics in industrial economics.

Introduction to I.O. I.O. (Industrial Organization) is a study about Market structure/organization Relationship with Firms Behavior Methodology Structure Conduct Performance Game Theory What we study: Strategy Based Approach

Profit Maximization Firms Objective Profit Maximization Firms Optimal Choice MP(q) = MR(q) – MC(q) MR(q*) = MC(q*) If MR > MC, expands output If MC > MR, reduce output

Perfect Competition The 4 assumptions 1. Many Buyers and Sellers 2. Homogeneity of Output 3. Perfect Information 4. Free Entry or Exit 1 – 3 : Price Takers

From a Single Firm to Market Profit-Maximizing Choice p = MC(q*) Market Supply = sum of individual supply(p) Market Equilibrium Supply(p) = Demand(p)

Efficiency Measures of Gains from Trade Consumer Surplus Producer Surplus Total Surplus Pareto Optimality If it is not possible to make one person better off without making another worse off.