2FirmAndCost - 3S03 INDUSTRIAL ORGANIZATION Instructor...

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3S03: INDUSTRIAL ORGANIZATION Instructor: Laura Grigolon [email protected] Office hours: Friday 10.00-11.00 AM 1
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Industrial organization: Firm and Costs 2
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Firm and Costs 1. Firm: inputs -> output 1. Input: capital, human labor, raw material 2. Output: steel 2. Costs: why do we need to study costs? 1. Marginal costs and profits determines prices and size of the firm 2. Theoretical work shows that oligopoly behavior depends on certain types of fixed costs 3. Industry regulation depends on the cost structure. Governments regulate industries in which entry leads to unsually high costs. Knowning how to regulate these industries requires knowledge of costs 3
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Part I: Firm 1. Objective: max profit + efficiency (best technology to transform input to output 1. Depart from profit max: conflict of interest between managers and shareholders 2. Depart from efficiency 2. Ownership: 1. Forms of ownership 2. Separation ownership and control 3. Size of firms 4. Change of ownership: mergers and acquisitions 4
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Forms of ownership 1. Single ownership 72% -> full liability 2. Multiple ownership 8% -> full liability 3. Corporations 20% -> limited liability Corporations make most sales. Their capital is divided intro shares held by individual who have only limited liability.
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