The Theory of Market Organization

The Theory of Market Organization (TMO) is the main subject in Economics (Microeconomics). How do firms compete? What strategies do firms have to compete better? When is it more profitable for firms to act aggressively and when not? The answers to these and other questions are very important for understanding the firms’ behavior and the practical functioning of markets. This subject is taught in all business schools («Strategy»). When can firms conspire to raise prices? The Theory of Market Organization is the basis for anti-monopoly legislation.

Specialists in this field might consult anti-monopoly authorities and companies, and act as experts in court. The course begins with a review of the basic concepts of Microeconomics related to production and firms, such as costs function, profit function, demand and supply curves. Then we continue the analysis of monopoly behavior.

After that, we explore a few basic models of competition. They allow us to illustrate the possible strategies employed by firms in different situations. For better understanding the strategic interaction of firms in these models, we will consult the basic concepts of Game Theory. This is a key instrument in modern economic theories. At the end of the course, we examine the incentives and barriers to collusion between firms.