The course “Market Power and Strategy” (Advanced Microeconomics I) focuses on the study of market structures characterized by market power. It examines the behavior of firms and market functioning in environments that deviate from perfect competition, emphasizing strategic interactions.

The course covers non-cooperative game theory as a tool to analyze various economic phenomena involving strategic interdependence. It then explores different models of oligopolistic competition and stability of agreements.

Prerequisites for this course include a solid understanding of subjects such as Mathematics I, Mathematics II, Microeconomics, and Intermediate Microeconomics. Proficiency in solving optimization problems (single or multivariable) and familiarity with differentiation and integration are essential for successful completion.

“Market Power and Strategy” is part of the Advanced Microeconomics sequence within the Economics degree. In the first year, students study an introduction to microeconomics in the course “Introducción a la Economía I: Principios de Microeconomía.” In the first semester of the second year, the course “Microeconomía” delves into consumer theory and exchange efficiency. The second-year course “Microeconomía Intermedia” focuses on producer theory, general equilibrium analysis in production economies, social welfare analysis, and market failures related to public goods and externalities. These two courses assume perfectly competitive environments. However, “Market Power and Strategy,” offered in the first semester of the third year, shifts attention to imperfectly competitive markets. Subsequently, the course “Incertidumbre y Contratos” (Advanced Microeconomics II) in the second semester of the third year explores decision-making under uncertainty and information economics. Together, these five courses form the microeconomics sequence in the Economics degree.

The knowledge gained in these preceding courses is essential for other microeconomics-related subjects in the degree program, such as Public Economics (Expenditure and Revenue), Experimental Economics, International Trade, Mathematical Programming and Game Theory, Environmental and Natural Resource Economics, and Information Economics.

Overall, “Market Power and Strategy” equips students with essential tools to understand firm strategic behavior and market dynamics. The insights gained are valuable for aspiring economists in their professional endeavors.

Course Objectives

• Analyze market structures characterized by market power.

• Study non-cooperative game theory and its usefulness in analyzing economic phenomena involving strategic interdependence.

• Apply the concepts learned to study different models of oligopolistic competition and the stability of agreements.



Specific Competencies

1. Identify, model, and analyze economic phenomena related to market structures characterized by market power.

2. Analyze multiperson choice problems with strategic interdependence using game theory, propose solutions, and apply game theory to oligopolistic markets and other strategic interaction problems in economics.



Learning Outcomes

1. Ability to identify, model, and analyze economic phenomena related to market structures characterized by market power.

2. Ability to analyze multiperson choice problems with strategic interdependence using game theory and apply it to oligopolistic markets.

3. Ability to use marginal analysis in studying economic phenomena.



Cross-Module Competencies

1. C3: Formulate reasoned judgments and make decisions on relevant issues with critical capacity. Analyze information from various perspectives: verbal, analytical, and graphical.

2. C6: Ability to communicate in writing, particularly in creating clear and coherent reports.

3. C8: Ability to work in teams with responsibility, respect, initiative, and leadership. Participation in group work processes.



Contribution to Sustainable Development Goals

1. Contribution to Goal 12: The course enhances understanding of production processes and inefficiencies that can arise due to market power concentration. This analysis informs the design of sustainable production and consumption processes.

2. Contribution to Goal 13: Using game theory tools, we analyze the public goods game structure related to countries’ contributions to climate change mitigation. This structure reveals individual incentives for problem resolution and cooperation in this global issue.

3. Contribution to Goal 17: By applying game theory tools, we examine individual incentives for forming alliances and cooperation, both in the short and long term. Understanding these individual incentives is crucial for stable alliances and robust international cooperation.

• Topic 1: Introduction

• Topic 2: Nash Equilibrium

• Topic 3: Applications of Nash Equilibrium

• Topic 4: Extensive-Form Games with Perfect Information

• Topic 5: Applications of Extensive-Form Games with Perfect Information

• Topic 6: Extensions of Extensive-Form Games with Perfect Information

• Topic 7: Repeated Games

In the lecture sessions, various topics that make up the subject will be developed interactively. In practice classes and seminars, the professor will present exercises related to the material, real-world problems, and experiments. Students will individually and collaboratively address issues related to the topics discussed in the lecture sessions and participate in proposed educational activities.

Active methodologies will be employed, including:

1. Role Play: Students take on specific roles in situations of strategic interaction and participate in simulated scenarios to apply concepts and skills related to game theory.

2. Just-in-Time Teaching: Professors collect questions or concerns from students before class and adapt their teaching based on those responses.

3. The Muddiest Point: At the end of a lesson, students write down what they found most confusing or difficult to understand. This helps instructors address problematic areas.

4. Game-Based Learning: Using games or simulations to teach concepts and skills interactively. This methodology is particularly relevant in this course, as it analyzes strategic interaction through game theory.

5. Minute Paper: At the end of class, students briefly write about what they learned or their main doubts. This provides immediate feedback to the instructor.



The goal of these methodologies is to encourage active student participation and enhance their learning experience.



Additionally, problem-based learning will be used, presenting real-world problems that demonstrate the need for game theory tools, which will then be applied to problem-solving.

• Continuous Assessment System
• Final Assessment System
• Tools and qualification percentages:
  • Written test to be taken (%): 70
  • Realization of Practical Work (exercises, cases or problems) (%): 20
  • Team projects (problem solving, project design)) (%): 10

The evaluation for the course will be based on continuous assessment of the students’ competencies. This ongoing assessment will take into account activities in practice classes, seminars, and participation in lectures.

Additionally, there will be a written test comprising a final exam (on the official date) where students will solve both theoretical questions and practice exercises, accounting for 70% of the final grade if they participate in continuous assessment. The work done in seminars and practice classes throughout the course contributes 30% to the final grade.

Students who wish to do so have the option of a single final exam, which will account for 100% of the grade on the official dates.

To ensure that continuous assessment always has a positive impact on the final evaluation, the final grade will be the maximum of either (1) the final exam grade or (2) a weighted average of 0.3 for continuous assessment and 0.7 for the final exam.

Additionally, students participating in continuous assessment can take a final exam on the last day of class. Those who choose to do so can also attend the official final exam on the assigned date. The final grade will be the higher of the two options if they attend both opportunities.

In the make up final exam, the assessment procedure remains the same as in the first sitting. Specifically, the final grade is determined by taking the maximum of either (1) the score from the final exam in the make up final exam or (2) a weighted average, where continuous assessment contributes 30% and the final exam contributes 70% to the overall grade.

Teaching materials on the Egela platform.

Basic bibliography

Osborne, Martin (2004). An Introduction to Game Theory. Oxford University Press.

In-depth bibliography

Gibbons, Robert (1992). A Primer in Game Theory. Prentice Hall.