Overview
Traditional IO
Since Cournot and Bertrand, IO has been focused upon the economic analysis of imperfect competition
among manufacturers. Manufacturers, until recently, have been at the heart of most developed
economies.
New Economy of Experts
In the last 30 years, there has been a great shift in developed economies to the service sector. In the last
10 years, there has been a further shift to the information service sector. In particular, more and more
of the economy is now influenced by or controlled by experts. In light of this trend and the anticipation
that you will be entering this economy, the focus of my course will be on the imperfect competition
among experts and their firms. Some examples of what I mean by experts are doctors, lawyers,
accountants, investment banker, credit rater, management consultants, movie rater, professors, priests,
astrologists, and in China, Fengsui masters. The last two years has shown that many financial products
such as ARMs, CDOSs are also credence goods and that these markets also suffer from an expert
problem. What characterizes this area of the knowledge economy are gross asymmetric information
between experts and the consumers of their services. As products get more technical, the expert issue
of sellers dealing with less well informed consumers becomes more important for all parts of IO. When
the consumer cannot assess the quality of a product even after consumption, the “expert problem

These problems have become important to China due to corruption and underdevelopment of the
system of regulation and certification for the health and safety of products. Some examples of recent
scandals are: lead in toys, antifreeze in toothpaste, toxic chemicals in dry wall, poisoned milk and baby
foods, poor construction quality which caused buildings to collapse in recent earthquakes and of course,
counterfeit products. The China brand was badly damaged during these scandals so that westerners and
Chinese alike tend to mistrust products from China. Without such trust, there won’t be a market for high
quality products and services from China. We will consider attempted solutions in the West which may
open the way for solutions for China.

Objectives of the Course
This is a research orientated course. The goal of which is to generate papers that will get us into
international conferences and good journals. It will be run largely like a workshop, where I will first
lecture about the basics, then help you find some topic to work on for your presentations. The first
presentation will be a literature review. The 2nd will be a research proposal. There is not methodological
restriction for possible presentation topics: it can be empirical, theoretical or experimental. However,
the topic must be in the area of credence goods/professional services. I will offer you a menu of papers,
help you find an interesting topic, related literature and structure the proposal.

Grading
Research is risky, and the quality of an idea can be hard to judge at the beginning. Furthermore, it’s hard
to come up with something interesting if it’s not fun. Thus, a lot of your grade will depend on things that
require only diligence ,e.g., attendance and class participation.
About 80% of the course grade will be based on two presentations: 5% for the topic, abstract, and list of
papers for bibliography, 35% for the literature review and 40% for a research proposal. The literature

review will be judged on your ability to present one or two papers and to answer related questions from
me and the class. The research proposal will be judged on the originality and interest of the research
idea, and feasibility of the research. The literature review part of the paper must be submitted to me the
day before your presentation. They will then be distributed to the class. Your research design must be
submitted 1 day before your presentation. The presentation of the literature review is a chance for you
to check and complete your understanding, since others will already have read it. The presentation of
your ideas is a chance to get feedback.

Since this is a research orientated course. The beginning of research is questioning and independent
thinking. Your participation is important for your learning. To encourage you to speak up, I will give you
points for questions and comments in class. About 20% will be based on class participation. 15% of this
will likely be based upon quizzes to check for basic understanding of the material.

Attendance
Past experience suggests that if a student misses classes, the quality of their class participation will be
poor, and their presentations will be a big waste of time for everyone. Therefore, attendance is
mandatory. Materials covered during excused absence needs to be made up ; I will test you on what you
missed. Any unexcused absence or more than 3 excused absences can result in dismissal from the
course.

Doing Well in the Course
This is a research oriented course. Research is full of risk. However, I am willing to largely insure you
against risk. If your attend, participate, and make an honest effort with your presentations, then, you
will definitely pass, and are likely to do ok, e.g., have a grade >80%. Two students who have failed
another course like this in the past had poor attendance, did terrible presentations, and one even
plagiarized.