In
economics
Economics () is a behavioral science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and interac ...
, 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, limited
information
Information is an Abstraction, abstract concept that refers to something which has the power Communication, to inform. At the most fundamental level, it pertains to the Interpretation (philosophy), interpretation (perhaps Interpretation (log ...
, and
barriers to entry
In theories of Competition (economics), competition in economics, a barrier to entry, or an economic barrier to entry, is a fixed cost that must be incurred by a new entrant, regardless of production or sales activities, into a Market (economics) ...
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
Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). Competition can arise between entities such as organisms, indi ...
and
monopoly
A monopoly (from Greek language, Greek and ) is a market in which one person or company is the only supplier of a particular good or service. A monopoly is characterized by a lack of economic Competition (economics), competition to produce ...
, 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. A third aspect is oriented to
public policy
Public policy is an institutionalized proposal or a Group decision-making, decided set of elements like laws, regulations, guidelines, and actions to Problem solving, solve or address relevant and problematic social issues, guided by a conceptio ...
related to
economic regulation,
antitrust law, and, more generally, the economic governance of law in defining property rights, enforcing contracts, and providing organizational
infrastructure
Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and pri ...
.
The extensive use of
game theory
Game theory is the study of mathematical models of strategic interactions. It has applications in many fields of social science, and is used extensively in economics, logic, systems science and computer science. Initially, game theory addressed ...
in industrial economics has led to the export of this tool to other branches of
microeconomics
Microeconomics is a branch of economics that studies the behavior of individuals and Theory of the firm, firms in making decisions regarding the allocation of scarcity, scarce resources and the interactions among these individuals and firms. M ...
, such as
behavioral economics
Behavioral economics is the study of the psychological (e.g. cognitive, behavioral, affective, social) factors involved in the decisions of individuals or institutions, and how these decisions deviate from those implied by traditional economi ...
and
corporate finance
Corporate finance is an area of finance that deals with the sources of funding, and the capital structure of businesses, the actions that managers take to increase the Value investing, value of the firm to the shareholders, and the tools and analy ...
. 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,
Joe S. Bain 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.
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 Performance
JEL: L2– Firm Objectives, Organization, and Behavior
JEL: L3–
Non-profit organizations and
Public enterpriseJEL: L4–
Antitrust Issues and Policies
JEL: L5–
Regulation
Regulation is the management of complex systems according to a set of rules and trends. In systems theory, these types of rules exist in various fields of biology and society, but the term has slightly different meanings according to context. Fo ...
and
Industrial policyJEL: L6– Industry Studies:
Manufacturing
Manufacturing is the creation or production of goods with the help of equipment, labor, machines, tools, and chemical or biological processing or formulation. It is the essence of the
secondary sector of the economy. The term may refer ...
JEL: L7– Industry Studies: Primary Products and Construction
JEL: L8– Industry Studies: Services
JEL: L9– Industry Studies:
Transportation
Transport (in British English) or transportation (in American English) is the intentional Motion, movement of humans, animals, and cargo, goods from one location to another. Mode of transport, Modes of transport include aviation, air, land tr ...
and
Utilities
Market structures
The common
market structures studied in this field are:
perfect competition,
monopolistic competition,
duopoly,
oligopoly,
oligopsony,
monopoly
A monopoly (from Greek language, Greek and ) is a market in which one person or company is the only supplier of a particular good or service. A monopoly is characterized by a lack of economic Competition (economics), competition to produce ...
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
Mergers and acquisitions (M&A) are business transactions in which the ownership of a company, business organization, or one of their operating units is transferred to or consolidated with another entity. They may happen through direct absorpt ...
*
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.
[Henry W. de Jong and William G. Shepherd, ed., 2007. ''Pioneers of Industrial Organization.'' Cheltenham, UK: Elgar. Description and conten]
links
an
preview
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,
[Lefteris Tsoulfidis, 2009. "Between Competition and Monopoly", ''Competing Schools of Economic Thought'', ch. 9, pp]
213
€“42
Springer
/ref> and 2010/1951.[Liran Einav and Jonathan Levin, 2010. "Empirical Industrial Organization: A Progress Report", ''Journal of Economic Perspectives'', 24(2), pp]
145–162.
/ref>
See also
* Bertrand competition
* Bertrand–Edgeworth model
* Competition policy
* Cournot competition
* Input–output model
* Important publications in industrial organization
* Structure–conduct–performance paradigm
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
an
Resources
* Cabral, LuĂs M. B., 2000. ''Introduction to Industrial Organization''. MIT Press. Links t
Description
and chapter-previe
links.
* Shepherd, William, 1985. ''The Economics of Industrial Organization'', Prentice-Hall.
* Shy, Oz, 1995. ''Industrial Organization: Theory and Applications''
Description
and chapter-previe
links.
MIT Press.
* Vives, Xavier, 2001. ''Oligopoly Pricing: Old Ideas and New Tools''. MIT Press
Description
and scroll to chapter-previe
links.
* Jeffrey Church & Roger Ware, 2005. "Industrial Organization: A Strategic Approach", (ak
)”, Free Textbook
* Nicolas Boccard, 2010. "Industrial Organization, a Contract Based approach (aka )”, Open Source Textbook
Journals
''The RAND Journal of Economics''
''International Journal of the Economics of Business''
and issue previe
links
''International Journal of Industrial Organization''
and issue-previe
links
''Journal of Industrial Economics''Aims and Scope
and issue-previe
links.
''Journal of Law, Economics, and Organization''
and issue-previe
links.
''Review of Industrial Organization''
External links
*
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Market (economics)
Management cybernetics