Industrial Organization: What, How, and Why

A sample of business press from just the last few years includes the following items: the emergence of a price war in the e-reader market involving Amazon's Kindle and Barnes & Noble's Nook and even Apple's iPad; guilty pleas from ten (so far) real estate investors admitting that they colluded to rig bids at public foreclosure auctions in California; widespread evidence that hospitals charge different prices for the same procedure depending on who the patient is (including evidence that the uninsured are often charged higher prices); and the filing of a suit by the US Department of Justice to block a proposed merger between two large mobile phone companies, AT&T and T-Mobile.

Students often feel that there is a considerable gap between stories like those just described and the economics they study in the classroom. This is so despite the fact that most modern texts include real world applications. Indeed, it is difficult to think of a contemporary economics textbook that does not include examples drawn from the practical business experience. Nevertheless, it is still far from unusual to hear remarks such as “economics is too abstract” or “this wasn't covered in the microeconomics that I studied.”

This book is very much in keeping with the modern practice of illustrating the applications of economic theory. Our aim is, however, more ambitious than just showing that economics can illuminate the everyday events of the business world. Our ...

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