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Industrial organization

Field that examines the structure of firms and markets

Field that examines the structure of firms and markets

Note

the field of economics

In economics, industrial organization is a field that extends the theory of the firm by analyzing the structure of firms and markets, as well as the boundaries between them. It introduces real-world features that depart from the perfectly competitive model, such as transaction costs, imperfect information, and barriers to entry faced by potential competitors.

The field studies how firms and markets are organized and how they behave across a spectrum ranging from competitive markets to monopoly, including cases shaped by government intervention and regulation.

Industrial organization combines theoretical models and empirical analysis to study issues such as market power, competition policy, oligopoly behavior, pricing strategies, vertical integration, and the design of contracts and institutions. It has applications in public policy, business strategy, and the regulation of industries.

There are different approaches to the subject. One approach is descriptive in providing an overview of industrial organization, such as measures of competition and the size-concentration of firms in an industry. A second approach uses microeconomic models to explain internal firm organization and market strategy, which includes internal research and development along with issues of internal reorganization and renewal. A third aspect is oriented to public policy related to economic regulation, antitrust law,• Richard A. Posner, 2001. Antitrust Law, 2nd ed. University of Chicago Press. Preview. • D. L. Rubinfeld, 2001. "Antitrust Policy", International Encyclopedia of the Social & Behavioral Sciences, pp. 553–560. and, more generally, the economic governance of law in defining property rights, enforcing contracts, and providing organizational infrastructure.• George J. Stigler, 1983. The Organization of Industry, University of Chicago Press. Description and contents links and preview. • Richard Schmalensee, 1988. "Industrial Economics: An Overview", Economic Journal, 98(392), pp. 643–681. Working paper link. • Handbook of Industrial Organization, Elsevier: :Richard Schmalensee and Robert Willig, ed., 1989. v. 1. Links to description & contents & (partial) chapter outlines. : _____, ed., 1989. v. 2. Links to description & contents and chapter outlines. :Mark Armstrong and Robert Porter, ed., 2007. v. 3. Links to description, chapter-content descriptions

The extensive use of game theory in industrial economics has led to the export of this tool to other branches of microeconomics, such as behavioral economics and corporate finance. Industrial organization has also had significant practical impacts on antitrust law and competition policy.

The development of industrial organization as a separate field owes much to Edward Chamberlin, Joan Robinson, Edward S. Mason, J. M. Clark,J.M. Clark, 1940. Toward a Concept of Workable Competition. American Economic Review, Vol. 30, No. 2, Part 1, Jun., pp. 241–256

• William L. Baldwin, 2007. "John Maurice Clark" in Pioneers of Industrial Organization, H. W. de Jong, W. G. Shepherd, ed., pp. 183–186. Joe S. Bain and Paolo Sylos Labini, among others.

Subareas

The Journal of Economic Literature (JEL) classification codes are one way of representing the range of economics subjects and subareas. There, Industrial Organization, one of 20 primary categories, has 9 secondary categories, each with multiple tertiary categories. The secondary categories are listed below with corresponding available article-preview links of The New Palgrave Dictionary of Economics Online and footnotes to their respective JEL-tertiary categories and associated New-Palgrave links. :JEL: L1 – Market Structure, Firm Strategy, and Market PerformanceJEL: L10 – General JEL: L11 – Production, Pricing, and Market structure; Size Distribution of Firms

JEL: L12 – Monopoly; Monopolization Strategies

JEL: L13 – Oligopoly and Other Imperfect Markets

JEL: L14 – Transactional Relationships; Contracts and Reputation; Networks

JEL: L15 – Information and Product Quality; Standardization and Compatibility

JEL: L16 – Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices

JEL: L17 – Open Source Products and Markets :JEL: L2 – Firm Objectives, Organization, and BehaviorJEL: L20 – General JEL: L21 – Business Objectives of the Firm

JEL: L22 – Firm Organization and Market Structure

JEL: L23 – Organization of Production

JEL: L24 – Contracting Out; Joint Ventures; Technology licensing

JEL: L25 – Firm Performance: Size, Diversification, and Scope

JEL: L26 – Entrepreneurship :JEL: L3 – Non-profit organizations and Public enterprise :JEL: L4 – Antitrust Issues and PoliciesJEL: L40 – General JEL: L41 – Monopolization; Horizontal Anticompetitive Practices

JEL: L42 – Vertical Restraints; Resale Price Maintenance; Quantity Discounts

JEL: L43 – Legal Monopolies and Regulation or Deregulation

JEL: L44 – Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations :JEL: L5 – Regulation and Industrial policyJEL: L51 – Economics of Regulation

JEL: L52 – Industrial Policy; Sectoral Planning Methods

JEL: L53] – Enterprise Policy :JEL: L6 – Industry Studies: ManufacturingJEL: L61 – Metals and Metal Products; Cement; Glass; Ceramics

JEL: L62 – Automobiles; Other Transportation Equipment

JEL: L63 – Microelectronics; Computers; Communications Equipment

JEL: L64 – Other Machinery; Business Equipment; Armaments

JEL: L65 – Chemicals; Rubber; Drugs; Biotechnology JEL: L66 – Food; Beverages; Cosmetics; Tobacco; Wine and Spirits

JEL: L67 – Other Consumer Nondurables: Clothing, Textiles, Shoes, and Leather

JEL: L68 – Appliances; Other Consumer Durables :JEL: L7 – Industry Studies: Primary Products and ConstructionJEL: L71 – Mining, Extraction, and Refining: Hydrocarbon Fuels

JEL: L72 – Mining, Extraction, and Refining: Other Nonrenewable Resources

JEL: L73 – Forest Products

JEL: L74 – Construction

JEL: L78 – Government Policy :JEL: L8 – Industry Studies: ServicesJEL: L80 – General JEL: L81 – Retail and Wholesale Trade; e-Commerce JEL: L82 – Entertainment; Media (Performing Arts, Visual Arts, Broadcasting, Publishing, etc.) JEL: L83 – Sports; Gambling; Recreation; Tourism JEL: L84 – Personal, Professional, and Business Services JEL: L85 – Real Estate Services JEL: L86 – Information and Internet Services; Computer Software JEL: L87 – Postal and Delivery Services

JEL: L88 – Government Policy :JEL: L9 – Industry Studies: Transportation and Utilities

Market structures

The common market structures studied in this field are: perfect competition, monopolistic competition, duopoly, oligopoly, oligopsony, monopoly and monopsony.

Areas of study

Industrial organization investigates the outcomes of these market structures in environments with

  • Price discrimination
  • Product differentiation
  • Durable goods
  • Experience goods
  • Collusion
  • Signalling, such as warranties and advertising.
  • Mergers and acquisitions
  • Entry and Exit

History of the field

A 2009 book Pioneers of Industrial Organization traces the development of the field from Adam Smith to recent times and includes dozens of short biographies of major figures in Europe and North America who contributed to the growth and development of the discipline.

Other reviews by publication year and earliest available cited works those in 1970/1937, 1972/1933, 1974, 1987/1937-1956 (3 cites), 1968–9 (7 cites), 2009/c. 1900, and 2010/1951.

Notes

References

  • Tirole, Jean (1988). The Theory of Industrial Organization, MIT press.
  • Belleflamme, Paul & Martin Peitz, 2010. Industrial Organization: Markets and Strategies. Cambridge University Press. Summary and Resources
  • Cabral, Luís M. B., 2000. Introduction to Industrial Organization. MIT Press. Links to Description and chapter-preview links.
  • Shepherd, William, 1985. The Economics of Industrial Organization, Prentice-Hall.
  • Shy, Oz, 1995. Industrial Organization: Theory and Applications. Description and chapter-preview links. MIT Press.
  • Vives, Xavier, 2001. Oligopoly Pricing: Old Ideas and New Tools. MIT Press. Description and scroll to chapter-preview links.
  • Jeffrey Church & Roger Ware, 2005. "Industrial Organization: A Strategic Approach", (aka IOSA )”, Free Textbook
  • Nicolas Boccard, 2010. "Industrial Organization, a Contract Based approach (aka )”, Open Source Textbook

Journals

References

  1. • [[Ronald H. Coase. R. H. Coase]], 1937. "[[The Nature of the Firm]]", ''Economica'', N.S., 4(16), pp. [https://web.archive.org/web/20120113105151/http://www.sonoma.edu/users/e/eyler/426/coase1.pdf 386–405].
     • _____, 1988. "The Nature of the Firm: Influence", ''Journal of Law, Economics, & Organization'', 4(1), pp. [https://www.jstor.org/pss/765013 33]–47.
     • _____, 1991. "[https://www.nobelprize.org/nobel_prizes/economics/laureates/1991/coase-lecture.html The Institutional Structure of Production]", Nobel Lecture, reprinted in 1992, ''American Economic Review'', 82(4), pp. [https://www.jstor.org/pss/2117340 713]–719.
     • [[Oliver E. Williamson]], 1981. "The Economics of Organization: The Transaction Cost Approach", ''American Journal of Sociology'', 87(3), pp. [https://web.archive.org/web/20141018232235/http://glenn.osu.edu/faculty/brown/home/Org%20Theory/Readings/Williamson1981.pdf 548–577].
     • _____, 2009. "[http://nobelprize.org/nobel_prizes/economics/laureates/2009/williamson_lecture.pdf Transaction Cost Economics: The Natural Progression]", Nobel Lecture, reprinted in 2010, ''American Economic Review'', 100(3), pp. 673–90.
  2. George J. Stigler, [1987] 2008. "Competition", ''The New Palgrave Dictionary of Economics'', 2nd Edition. [http://www.dictionaryofeconomics.com/article?id=pde2008_C000261&edition= Abstract.]
  3. link. (2017-09-05)
  4. (May 3, 2011). "Handbook of Industrial Organization Volume 1".
  5. Richard Schmalensee and Robert Willig, eds., 1989. ''Handbook of Industrial Organization'', Elsevier, v. 2, Part 5, Government Intervention in the Marketplace, ch. 22–26, abstract [http://www.sciencedirect.com/science/handbooks/1573448X/2 links.]
  6. • [[Avinash K. Dixit]], 2008. "economic governance", ''The New Palgrave Dictionary of Economics'', 2nd Edition. [http://www.dictionaryofeconomics.com/article?id=pde2008_E000260&edition=current&q= Abstract.]
     • [[Oliver E. Williamson]], 1996. ''The Mechanisms of Governance'', "Prologue", pp. [https://books.google.com/books?id=meERBVysP6YC&pg=PA3 3]–20.
  7. Exemplified in such advanced textbooks as [[Jean Tirole]], 1988, ''The Theory of Industrial Organization'', MIT Press, [https://archive.org/details/theoryofindustri00jean description] and chapter-preview [https://archive.org/details/theoryofindustri00jean links.]
  8. • Edward Hastings Chamberlin, 1933. ''The Theory of [[Monopolistic Competition]]: A Re-orientation of the Theory of Value'', 1965, 8th ed. Harvard University Press.
     • R. Rothschild, 1987. "The Theory of Monopolistic Competition: E.H. Chamberlin's Influence on Industrial Organisation Theory over Sixty Years", ''Journal of Economic Studies'', 14(1), pp. 34–54. [http://www.emeraldinsight.com/journals.htm?articleid=1709405 Abstract].
     • William L. Baldwin, 2007. "Edward Hastings Chamberlin", in ''Pioneers of Industrial Organization'', H. W. de Jong, W. G. Shepherd, ed., pp. [https://books.google.com/books?id=TpfrPPOFWUIC&pg=PA199=FALSE 199–].
  9. Edward S. Mason, 1939. "Price and Production Policies of Large-Scale Enterprise", ''American Economic Review'', 29(1, Supplement), pp. [https://www.jstor.org/pss/1806955 61]–74.
     • _____, 1949. "The Current Status of the Monopoly Problem in the United States", ''Harvard Law Review'', 62(8), pp. [https://www.jstor.org/pss/1336466 1265]–1285.
     • _____, 1957. ''Economic Concentration and the Monopoly Problem'', Harvard University Press. Review [https://www.jstor.org/pss/1234950 extract].
     • William G. Shepherd, 2007. "Edward S. Mason", in ''Pioneers of Industrial Organization'', H. W. de Jong, W. G. Shepherd, ed.
  10. • Joe S. Bain, 1956. ''Barriers to New Competition: Their Character and Consequences in Manufacturing'', Harvard University Press. Review extracts [https://www.jstor.org/discover/10.2307/1811245?uid=3739936&uid=2&uid=4&uid=3739256&sid=21101828169287][https://www.jstor.org/discover/10.2307/2097589?uid=3739936&uid=2&uid=4&uid=3739256&sid=21101828169287].
     • _____, 1959, 2nd ed., 1968. ''Industrial Organization: A Treatise'', John Wiley.
     • [[Richard E. Caves]], 2007. "Joe S. Bain", in ''Pioneers of Industrial Organization'', H. W. de Jong, W. G. Shepherd, ed., pp. [https://books.google.com/books?id=TpfrPPOFWUIC&pg=PA224 224–231].
  11. E. T. Grether, 1970. "Industrial Organization: Past History and Future Problems", ''American Economic Review'', 60(2), pp. [https://www.jstor.org/pss/1815790 83]–89.
  12. link. (2011-07-22 and article [http://www.e-elgar.co.uk/Bookentry_contents.lasso?id=593 list.] {{Webarchive). link. (2014-10-24 23 articles, dating from 1937 to 1987.)
  13. A complete list of the JEL Industrial Organization codes is at [[JEL classification codes#Industrial organization JEL: L Subcategories]].
  14. Public enterprises]]; Public-Private Enterprises
    JEL: L33 – Comparison of Public and Private Enterprises; [[Privatization]]; [[Outsourcing. Contracting out]]
  15. JEL: L91 – Transportation: General
    JEL: L92 – Railroads and Other Surface Transportation
    JEL: L93 – [[Air transportation]]
    JEL: L94 – [[Electric utility. Electric utilities]]
    JEL: L95 – Gas Utilities; Pipelines; Water Utilities
    . JEL: L96 – [[Telecommunications industry. Telecommunications]]
    JEL: L97 – Utilities: General
    JEL: L98 – Government Policy
  16. link. (August 7, 2011)
  17. James W. McKie, 1972. "Industrial Organization: Boxing the Compass", ch. 1 in [[Victor R. Fuchs. V. R. Fuchs]], ed., ''Policy Issues and Research Opportunities in Industrial Organization'', NBER, pp. [https://www.nber.org/chapters/c7615.pdf 1-15].
  18. [[Almarin Phillips]] and Rodney E. Stevenson, 1974. "The Historical Development of Industrial Organization", ''History of Political Economy'', 6(3), pp. 324–342. In Papers from the First Conference of the History of Economics Society. [http://hope.dukejournals.org/content/6/3/324.citation Citation].
  19. Timothy F. Bresnahan and Richard Schmalensee, 1987. "The Empirical Renaissance in Industrial Economics: An Overview", ''Journal of Industrial Economics'', 35(4), pp. [https://www.jstor.org/pss/2098578 371]–378.
  20. Lefteris Tsoulfidis, 2009. "Between Competition and Monopoly", ''Competing Schools of Economic Thought'', ch. 9, pp. [https://books.google.com/books?id=8L2Zoui099UC&pg=PA213=ONEPAGE 213]–42. [https://archive.today/20130203011622/http://www.springerlink.com/content/978-3-540-92692-4 Springer]
  21. Liran Einav and [[Jonathan Levin (economist). Jonathan Levin]], 2010. "Empirical Industrial Organization: A Progress Report", ''Journal of Economic Perspectives'', 24(2), pp. [http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.24.2.145 145–162.]
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