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Industrial organization

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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,<ref>• 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.</ref> 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<ref>George J. Stigler, [1987] 2008. "competition", The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.</ref> and monopoly,<ref>• 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.</ref> 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.<ref>• 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. Template:Cite book
 • 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 Template:Cite book
 • Martin Shubik, 1987. A Game-Theoretic Approach to Political Economy, Part II. MIT Press. Description. Template:Webarchive</ref> A third aspect is oriented to public policy related to economic regulation,<ref>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.</ref> antitrust law,<ref>• 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. 

 Template:Cite book</ref> and, more generally, the economic governance of law in defining property rights, enforcing contracts, and providing organizational infrastructure.<ref>• 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.</ref><ref>• 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 Template:Webarchive & (partial) chapter outlines.
_____, ed., 1989. v. 2. Links to description & contents Template:Webarchive and chapter outlines.
Mark Armstrong and Robert Porter, ed., 2007. v. 3. Links to description, chapter-content descriptions Template:Webarchive</ref>

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.<ref>Exemplified in such advanced textbooks as Jean Tirole, 1988, The Theory of Industrial Organization, MIT Press, description and chapter-preview links.</ref>

The development of industrial organization as a separate field owes much to Edward Chamberlin,<ref>• 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–.</ref> Joan Robinson, Edward S. Mason,<ref>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.</ref> J. M. Clark,<ref>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.</ref> Joe S. Bain<ref>• Joe S. Bain, 1956. Barriers to New Competition: Their Character and Consequences in Manufacturing, Harvard University Press. Review extracts [1][2].
 • _____, 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.</ref> and Paolo Sylos Labini, among others.<ref name="Grether">E. T. Grether, 1970. "Industrial Organization: Past History and Future Problems", American Economic Review, 60(2), pp. 83–89.</ref><ref>Oliver E. Williamson, ed., 1990. Industrial Organization, Edward Elgar. Description Template:Webarchive and article list. Template:Webarchive23 articles, dating from 1937 to 1987.</ref>

SubareasEdit

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.<ref>A complete list of the JEL Industrial Organization codes is at JEL classification codes#Industrial organization JEL: L Subcategories.</ref> 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<ref>JEL: 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</ref>

JEL: L2 – Firm Objectives, Organization, and Behavior<ref>JEL: 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</ref>

JEL: L3 – Non-profit organizations and Public enterprise<ref>JEL: L31 – Nonprofit Institutions; NGOs
JEL: L32 – Public enterprises; Public-Private Enterprises
JEL: L33 – Comparison of Public and Private Enterprises; Privatization; Contracting out</ref>
JEL: L4 – Antitrust Issues and Policies<ref>JEL: 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</ref>

JEL: L5 – Regulation and Industrial policy<ref>JEL: L51 – Economics of Regulation


JEL: L52 – Industrial Policy; Sectoral Planning Methods
JEL: L53] – Enterprise Policy</ref>

JEL: L6 – Industry Studies: Manufacturing<ref>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</ref>

JEL: L7 – Industry Studies: Primary Products and Construction<ref>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</ref>

JEL: L8 – Industry Studies: Services<ref>JEL: 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</ref>

JEL: L9 – Industry Studies: Transportation and Utilities<ref>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</ref>

Market structuresEdit

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

Areas of studyEdit

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

History of the fieldEdit

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.<ref name="“bazar1">Henry W. de Jong and William G. Shepherd, ed., 2007. Pioneers of Industrial Organization. Cheltenham, UK: Elgar. Description and content links and preview. Template:Webarchive</ref>

Other reviews by publication year and earliest available cited works those in 1970/1937,<ref name="Grether"/> 1972/1933,<ref>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.</ref> 1974,<ref>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. Citation.</ref> 1987/1937-1956 (3 cites), 1968–9 (7 cites),<ref>Timothy F. Bresnahan and Richard Schmalensee, 1987. "The Empirical Renaissance in Industrial Economics: An Overview", Journal of Industrial Economics, 35(4), pp. 371–378.</ref> 2009/c. 1900,<ref name="bazar2">Lefteris Tsoulfidis, 2009. "Between Competition and Monopoly", Competing Schools of Economic Thought, ch. 9, pp. 213–42. Springer</ref> and 2010/1951.<ref>Liran Einav and Jonathan Levin, 2010. "Empirical Industrial Organization: A Progress Report", Journal of Economic Perspectives, 24(2), pp. 145–162.</ref>

See alsoEdit

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NotesEdit

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ReferencesEdit

  • 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. Template:ISBN
  • 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 Template:Webarchive)”, Free Textbook
  • Nicolas Boccard, 2010. "Industrial Organization, a Contract Based approach (aka Template:Usurped)”, Open Source Textbook

JournalsEdit

External linksEdit

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