London School of Economics and Political Science (LSE)

Modules

Strategy [119]

1. Basic game theory. Two-player games. Static and dynamic games and some examples. Equilibrium concepts and solution mechanisms - Nash equilibrium, dominant/dominated strategies, backward induction. 2. Oligopoly competition. Perfect competition and monopoly. Price competition and the Bertrand paradox. Quantity competition. Reaction functions. Bertrand versus Cournot.
3. Analysis of market structure. Describing market structure: C4-ratio, Herfindahl index, Lerner index and market power. Market definition – techniques and interpretation.
4. Collusion. Cartels and antitrust. Cartel stability and the discount factor. Market dynamics and stability of collusion.
5. Strategic alliances. Portfolio test. Strategic and business partnerships. Sources of complementarity. Resource accumulation. Absorptive capacity.
6. Realising intra-firm synergies. Incentive-setting: Free riding versus cooperation. Interfaces: Modularity, task separation and task similarity.
7. Distinctive capabilities and competitive advantage. Identifying competitive advantage. Sustainability of competitive advantage. Innovation, architecture, strategic assets, reputation. Leveraging distinctive capabilities.
8. Strategic asymmetries. Economies of Scale, sources and consequences. Scope Economies: Airline Hubs. Learning or experience curve. Firm strategies with EoScale/Scope/Learning. First-mover advantages. Market structure with increasing returns.
9. Value chain analysis and vertical relations. Double marginalisation and its remedies. Vertical foreclosure. Retailer competition and investment externalities.
10. Vertical integration and transaction cost. Make or Buy. Contracts. Relation-Specific Assets and Hold-Up. Economic Rents and Quasi-Rents.
11. Industry dynamics. Product life cycle: Identifying pioneers and lead users. Dominant designs and industry dynamics, increasing returns. Mass market and mass marketing. PLC and competition.
12. Entry and entry deterrence. Structural determinants of entry. Entry barriers and exit barriers. Entry deterrence. Identifying entrants.
13. Strategic exit and declining industries. Wars of attrition. Commitment and credibility. Deep pockets. Demand forecast and substitute markets.
14. Research and Development. Market structure and R&D intensity. R&D rivalry. Monopolists’ and entrants’ R&D incentives. Risk choice of R&D. Benefits of the patent system. Sleeping patents. Spillovers.
15. Technology adoption. Preemption games. Option value and future technological generations. Technology diffusion: Heterogeneity, epidemic, and population ecology approaches.
16. Network effects. Direct and indirect network effects. Systems goods. Excess inertia. Excess momentum. Firm strategies with network effects. Standards Battles.
17. Regulation. Abuse of monopoly power. Joint dominance. Price caps. Predatory pricing. R&D cooperation. Collusion detection.

All topics will be supplemented in the subject guide with specially written case studies.