analyzes the economics of networks, telecommunications, the Internet, and
related industries, including cable television. We study in-depth the economics
of monopoly and oligopoly as applied to network industries, including to
telecommunications markets and the Internet. We study key strategic decisions
of companies in network industries. We analyze a firm’s decision whether
to provide products that are compatible with those of competitors, or to engage
in technical standards wars such as VHS vs. Beta in video players, Windows vs.
Mac vs. Linux in operating systems for PCs, MP3 vs. WMA vs. RealAudio in
digitized music, and HD DVD vs. Blu-Ray.Among others, we discuss technology transitions in information delivery
with particular application to electronic music delivery and video delivery
through Netflix.In telecommunications,
we study the evolution of the industry, paying special attention to the crucial
antitrust intervention that resulted in the 1981 breakup of AT&T and to the
reform attempted by the Telecommunications Act of 1996. We discuss traditional
telecommunications markets, including long distance, local, and international;
“new” telecommunications markets including cellular and PCS; and
“emerging” telecommunications markets based on the Internet
(“VOIP”), as well as electronic commerce. We analyze the current
wave of mergers and consolidation in the industry from the perspective of
“digital convergence” and predict the framework and direction of
industry change. We also discuss antitrust and public policy issues in network
industries, focusing on the Microsoft antitrust case among others.
Internet Evangelist, Google, father of the Internet (invited)
·Ira Rubinstein (NYULawSchool, former Microsoft)
Requirements.This course is intended for MBA students who have completed the core
microeconomics course. Law students may take the course with consent of the
instructor.Students are expected to
participate in class.Students will
submit a paper in lieu of a final exam.After the midterm, student groups will start presentations on the
preliminary versions of their final paper.
Readings. There are no required textbooks. We will rely on the package of notes and
readings that is available to download.The following books may also be helpful and are kept on reserve in the
·Brock, Gerald, The
Telecommunications Industry: The Dynamics of Market Structure,HarvardUniversity Press,
and Jeff Perloff, Modern Industrial Organization, Harper Collins.
·Crandall, Robert, After the Breakup: US
Telecommunications in a More Competitive Era,The
Brookings Institute, Washington, D.C., 1991.
Jean-Jacques, and Jean Tirole, (2002), Competition in Telecommunications,
·Mitchell, Bridger M., and Ingo Vogelsang, (1991), Telecommunications
Pricing: Theory and Practice.CambridgeUniversity Press.
·Owen, Bruce, and Steve Wildman, Video Economics,HarvardUniversity Press,
·Shapiro, Carl, and Hal Varian, Information Rules, HarvardBusinessSchool Press,
·Wenders, John, The
Economics of Telecommunications: Theory and Policy, Ballinger, 1987.
A.Unregulated Network Markets
1.Introduction and Discussion of
Digital Convergence (1/2 week)
·What is the information superhighway
·What is digital convergence, what markets it affects