Industrial organization or industrial economics is a field of economics that analyzes the structure and behavior of firms and imperfectly competitive market structures.Richard Schmalensee, 1988. "Industrial Economics: An Overview", Economic Journal, 98(392), pp. 643-681. https://doi.org/10.2307/2233907 It introduces real-world features that depart from the model of perfect competition, such as transaction costs,• 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. • _____, 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. 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 marketsGeorge J. Stigler, 2008. "Competition", The New Palgrave Dictionary of Economics, 2nd Edition. Abstract. to monopoly,• 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. • Dennis W. Carlton and Jeffrey M. Perloff, 2004. Modern Industrial Organization, 4th edition, pp. 2–3. Description. 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.• 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. • 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 • Martin Shubik, 1987. A Game-Theoretic Approach to Political Economy, Part II. MIT Press. Description. A third aspect is oriented to public policy related to economic regulation,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. 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.• 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.• George J. Stigler, 1983. The Organization of Industry, University of Chicago Press. Description and contents 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.Exemplified in such advanced textbooks as Jean Tirole, 1988, The Theory of Industrial Organization, MIT Press, description and chapter-preview links.
The development of industrial organization as a separate field owes much to Edward Chamberlin,• 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–. Joan Robinson, Edward S. Mason,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. 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• Joe S. Bain, 1956. Barriers to New Competition: Their Character and Consequences in Manufacturing, Harvard University Press. Review extracts . • _____, 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. and Paolo Sylos Labini, among others.E. T. Grether, 1970. "Industrial Organization: Past History and Future Problems", American Economic Review, 60(2), pp. 83–89.Oliver E. Williamson, ed., 1990. Industrial Organization, Edward Elgar. Description and article list. 23 articles, dating from 1937 to 1987.
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.A complete list of the JEL Industrial Organization codes is at JEL classification codes#Industrial organization JEL: L Subcategories. 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 – GeneralJEL: 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 – GeneralJEL: 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 enterpriseJEL: L31 – Nonprofit Institutions; NGOsJEL: L32 – Public enterprises; Public-Private EnterprisesJEL: L33 – Comparison of Public and Private Enterprises; Privatization; Contracting out JEL: L4 – Antitrust Issues and PoliciesJEL: L40 – GeneralJEL: 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; BiotechnologyJEL: 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 – GeneralJEL: L81 – Retail and Wholesale Trade; e-CommerceJEL: L82 – Entertainment; Media (Performing Arts, Visual Arts, Broadcasting, Publishing, etc.)JEL: L83 – Sports; Gambling; Recreation; TourismJEL: L84 – Personal, Professional, and Business ServicesJEL: L85 – Real Estate ServicesJEL: L86 – Information and Internet Services; Computer SoftwareJEL: L87 – Postal and Delivery Services JEL: L88 – Government Policy JEL: L9 – Industry Studies: Transportation and UtilitiesJEL: L91 – Transportation: GeneralJEL: L92 – Railroads and Other Surface TransportationJEL: L93 – Air transportationJEL: L94 – Electric utilitiesJEL: L95 – Gas Utilities; Pipelines; Water Utilities|JEL: L96 – TelecommunicationsJEL: L97 – Utilities: GeneralJEL: L98 – Government Policy
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