Industrial organization explained

In economics, industrial organization is a field that builds on the theory of the firm by examining the structure of (and, therefore, the boundaries between) firms and markets. Industrial organization adds real-world complications to the perfectly competitive model, complications such as transaction costs,[1] limited information, and barriers to entry of new firms that may be associated with imperfect competition. It analyzes determinants of firm and market organization and behavior on a continuum between competition[2] and monopoly,[3] including from government actions.

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.[4] A third aspect is oriented to public policy related to economic regulation,[5] antitrust law,[6] and, more generally, the economic governance of law in defining property rights, enforcing contracts, and providing organizational infrastructure.[7] [8]

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.[9]

The development of industrial organization as a separate field owes much to Edward Chamberlin,[10] Joan Robinson, Edward S. Mason,[11] J. M. Clark,[12] Joe S. Bain[13] and Paolo Sylos Labini, among others.[14] [15]

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.[16] 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 Performance[17]

JEL: L2 – Firm Objectives, Organization, and Behavior[18]

JEL: L3 – Non-profit organizations and Public enterprise[19]

JEL: L4 – Antitrust Issues and Policies[20]

JEL: L5 – Regulation and Industrial policy[21]

JEL: L6 – Industry Studies: Manufacturing[22]

JEL: L7 – Industry Studies: Primary Products and Construction[23]

JEL: L8 – Industry Studies: Services[24]

JEL: L9 – Industry Studies: Transportation and Utilities[25]

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

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.[26]

Other reviews by publication year and earliest available cited works those in 1970/1937,[14] 1972/1933,[27] 1974,[28] 1987/1937-1956 (3 cites), 1968–9 (7 cites),[29] 2009/c. 1900,[30] and 2010/1951.[31]

See also

See main article: Outline of industrial organization.

References

Journals

Notes and References

  1. • R. H. Coase, 1937. "The Nature of the Firm", Economica, N.S., 4(16), pp. 386–405.
     • _____, 1988. "The Nature of the Firm: Influence", Journal of Law, Economics, & Organization, 4(1), pp. 33–47. Reprinted in The Nature of the Firm: Origins, Evolution, and Development, 1993, O. E. Williamson and S, G. Winter, ed., pp. 61–74.
     • _____, 1991. "The Institutional Structure of Production", Nobel Lecture, reprinted in 1992, American Economic Review, 82(4), pp. 713–719.
     • Oliver E. Williamson, 1981. "The Economics of Organization: The Transaction Cost Approach", American Journal of Sociology, 87(3), pp. 548–577.
     • _____, 2009. "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. Abstract.
  3. • Luigi Zingales, 2008. "corporate governance", The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
     • Oliver E. Williamson, 2002. "The Theory of the Firm as Governance Structure: From Choice to Contract", Journal of Economic Perspectives, 16(3), pp. 171–195.
     • Frederic M. Scherer and David Ross, 1990. Industrial Market Structure and Economic Performance, 3rd ed. Description and 1st ed. review extract.
      • Dennis W. Carlton and Jeffrey M. Perloff, 2004. Modern Industrial Organization, 4th edition, pp. 2–3. Description.
  4. • Frederic M. Scherer and David Ross, 1990. Industrial Market Structure and Economic Performance, 3rd ed. Description and 1st ed. review extract.
     • Dennis W. Carlton and Jeffery M. Perloff, 2004. "Modern Industrial Organization, Overview", ch. 5, Handbook of Industrial Organization, Elsevier, v. 1, pp. 259–327. Book: 10.1016/S1573-448X(89)01008-3. Chapter 5 Noncooperative game theory for industrial organization: An introduction and overview. Handbook of Industrial Organization Volume 1. 1. 259–327. 1989. Fudenberg. Drew. Tirole. Jean. 9780444704344. 154265880.
     • Carl Shapiro, 1989. "The Theory of Business Strategy", RAND Journal of Economics, 20(1), pp. 125–137.
     • Kyle Bagwell and Asher Wolinsky (2002). "Game theory and Industrial Organization", ch. 49, Handbook of Game Theory with Economic Applications, v. 3, pp. 1851–1895 Book: 10.1016/S1574-0005(02)03012-6. Chapter 49 Game theory and industrial organization. Handbook of Game Theory with Economic Applications Volume 3. 3. 1851–1895. 2002. Bagwell. Kyle. Wolinsky. Asher. 9780444894281.
     • Martin Shubik, 1987. A Game-Theoretic Approach to Political Economy, Part II. MIT Press. Description.
  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 links.
  6. • 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. Book: Antitrust Law, Second Edition . April 10, 2017 . https://web.archive.org/web/20170107191058/https://books.google.com/books?hl=en&lr=&id=vV3i8XCzc8cC&oi=fnd&pg=PR5&dq

    false

    . January 7, 2017 . bot: unknown . 9780226675787 . Posner . Richard A. . 2009-04-22 .
  7. • Avinash K. Dixit, 2008. "economic governance", The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
     • Oliver E. Williamson, 1996. The Mechanisms of Governance, "Prologue", pp. 3–20.
  8. • 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

  9. Exemplified in such advanced textbooks as Jean Tirole, 1988, The Theory of Industrial Organization, MIT Press, description and chapter-preview links.
  10. • 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. Abstract.
     • William L. Baldwin, 2007. "Edward Hastings Chamberlin", in Pioneers of Industrial Organization, H. W. de Jong, W. G. Shepherd, ed., pp. 199–.
  11. Edward S. Mason, 1939. "Price and Production Policies of Large-Scale Enterprise", American Economic Review, 29(1, Supplement), pp. 61–74.
     • _____, 1949. "The Current Status of the Monopoly Problem in the United States", Harvard Law Review, 62(8), pp. 1265–1285.
     • _____, 1957. Economic Concentration and the Monopoly Problem, Harvard University Press. Review extract.
     • William G. Shepherd, 2007. "Edward S. Mason", in Pioneers of Industrial Organization, H. W. de Jong, W. G. Shepherd, ed.
  12. 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.
  13. • 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=21101828169287https://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. 224–231.
  14. E. T. Grether, 1970. "Industrial Organization: Past History and Future Problems", American Economic Review, 60(2), pp. 83–89.
  15. Oliver E. Williamson, ed., 1990. Industrial Organization, Edward Elgar. Description and article list. 23 articles, dating from 1937 to 1987.
  16. A complete list of the JEL Industrial Organization codes is at .
  17. http://www.dictionaryofeconomics.com/search_results?q=&field=content&edition=all&topicid=L10 JEL: L10
  18. http://www.dictionaryofeconomics.com/search_results?q=&field=content&edition=all&topicid=L20 JEL: L20
  19. http://www.dictionaryofeconomics.com/search_results?q=&field=content&edition=all&topicid=L31 JEL: L31
  20. http://www.dictionaryofeconomics.com/search_results?q=&field=content&edition=all&topicid=L40 JEL: L40
  21. JEL: L51 – Economics of Regulation
    JEL: L52 – Industrial Policy; Sectoral Planning Methods
    JEL: L53
  22. JEL: 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
  23. JEL: 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
  24. http://www.dictionaryofeconomics.com/search_results?q=&field=content&edition=all&topicid=L80 JEL: L80
  25. JEL: L91 – Transportation: General
    JEL: L92 – Railroads and Other Surface Transportation
    JEL: L93 – Air transportation
    JEL: L94 – Electric utilities
    JEL: L95 – Gas Utilities; Pipelines; Water Utilities
    |JEL: L96 – Telecommunications
    JEL: L97 – Utilities: General
    JEL: L98 – Government Policy
  26. Henry W. de Jong and William G. Shepherd, ed., 2007. Pioneers of Industrial Organization. Cheltenham, UK: Elgar. Description and content links and preview.
  27. James W. McKie, 1972. "Industrial Organization: Boxing the Compass", ch. 1 in V. R. Fuchs, ed., Policy Issues and Research Opportunities in Industrial Organization, NBER, pp. 1-15.
  28. [Almarin Phillips]
  29. Timothy F. Bresnahan and Richard Schmalensee, 1987. "The Empirical Renaissance in Industrial Economics: An Overview", Journal of Industrial Economics, 35(4), pp. 371–378.
  30. Lefteris Tsoulfidis, 2009. "Between Competition and Monopoly", Competing Schools of Economic Thought, ch. 9, pp. 213–42. Springer
  31. Liran Einav and Jonathan Levin, 2010. "Empirical Industrial Organization: A Progress Report", Journal of Economic Perspectives, 24(2), pp. 145–162.

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