In economics, industrial organization is a field that builds on the

theory of the firm The theory of the firm consists of a number of economic theories that explain and predict the nature of the firm, company, or corporation, including its existence, behaviour, structure, and relationship to the market. Firms are key drivers in eco ...

by examining the structure of (and, therefore, the boundaries between) firms and markets. Industrial organization adds real-world complications to the

perfectly competitive In economics, specifically general equilibrium theory, a perfect market, also known as an atomistic market, is defined by several idealizing conditions, collectively called perfect competition, or atomistic competition. In theoretical models wh ...

model, complications such as

transaction cost In economics and related disciplines, a transaction cost is a cost in making any economic trade when participating in a market. Oliver E. Williamson defines transaction costs as the costs of running an economic system of companies, and unlike pr ...

s, limited

information Information is an abstract concept that refers to that which has the power to inform. At the most fundamental level information pertains to the interpretation of that which may be sensed. Any natural process that is not completely random, ...

, and

barriers to entry In theories of 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 that incumbents do not have or hav ...

of new firms that may be associated with

imperfect competition In economics, imperfect competition refers to a situation where the characteristics of an economic market do not fulfil all the necessary conditions of a perfectly competitive market. Imperfect competition will cause market inefficiency when it happ ...

. 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, indivi ...

and

monopoly A monopoly (from Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situation where a speci ...

, 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 Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics focu ...

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 decided set of elements like laws, regulations, guidelines, and actions to solve or address relevant and real-world problems, guided by a conception and often implemented by programs. Public ...

related to

economic regulation Regulatory economics is the economics of regulation. It is the application of law by government or regulatory agencies for various purposes, including remedying market failure, protecting the environment and economic management. Regulation Reg ...

antitrust law Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust ...

, 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 priv ...

. The extensive use of

game theory Game theory is the study of mathematical models of strategic interactions among rational agents. Myerson, Roger B. (1991). ''Game Theory: Analysis of Conflict,'' Harvard University Press, p.&nbs1 Chapter-preview links, ppvii–xi It has applic ...

in industrial economics has led to the export of this tool to other branches of

microeconomics Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics focu ...

, such as

behavioral economics Behavioral economics studies the effects of psychological, cognitive, emotional, cultural and social factors on the decisions of individuals or institutions, such as how those decisions vary from those implied by classical economic theory. ...

and corporate finance. Industrial organization has also had significant practical impacts on

and

competition policy Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust ...

. The development of industrial organization as a separate field owes much to

Edward Chamberlin Edward Hastings Chamberlin (May 18, 1899 – July 16, 1967) was an American economist. He was born in La Conner, Washington, and died in Cambridge, Massachusetts. Chamberlin studied first at the University of Iowa (where he was influenced by ...

Joan Robinson Joan Violet Robinson (''née'' Maurice; 31 October 1903 – 5 August 1983) was a British economist well known for her wide-ranging contributions to economic theory. She was a central figure in what became known as post-Keynesian economics. B ...

, 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 ''The New Palgrave Dictionary of Economics'' (2018), 3rd ed., is a twenty-volume reference work on economics published by Palgrave Macmillan. It contains around 3,000 entries, including many classic essays from the original Inglis Palgrave Dictio ...

Online and footnotes to their respective JEL-tertiary categories and associated New-Palgrave links.
JEL: L1
–

Market Structure Market structure, in economics, depicts how firms are differentiated and categorised based on the types of goods they sell (homogeneous/heterogeneous) and how their operations are affected by external factors and elements. Market structure makes i ...

, Firm Strategy, and Market Performance
JEL: L2
– Firm Objectives, Organization, and Behavior
JEL: L3
–

Non-profit organizations A nonprofit organization (NPO) or non-profit organisation, also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in co ...

and

Public enterprise A state-owned enterprise (SOE) is a government entity which is established or nationalised by the ''national government'' or ''provincial government'' by an executive order or an act of legislation in order to earn profit for the governme ...

JEL: L4
–

Antitrust Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as 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. For ...

and

Industrial policy An industrial policy (IP) or industrial strategy of a country is its official strategic effort to encourage the development and growth of all or part of the economy, often focused on all or part of the manufacturing sector. The government takes m ...

JEL: 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 secondary sector of the economy. The term may refer to a ran ...

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 movement of humans, animals, and goods from one location to another. Modes of transport include air, land (rail and road), water, cable, pipeline, a ...

and

Utilities A public utility company (usually just utility) is an organization that maintains the infrastructure for a public service (often also providing a service using that infrastructure). Public utilities are subject to forms of public control and r ...

Market structures

The common

market structure Market structure, in economics, depicts how firms are differentiated and categorised based on the types of goods they sell (homogeneous/heterogeneous) and how their operations are affected by external factors and elements. Market structure makes i ...

s studied in this field are: perfect competition,

monopolistic competition Monopolistic competition is a type of imperfect competition such that there are many producers competing against each other, but selling products that are differentiated from one another (e.g. by branding or quality) and hence are not perfect ...

duopoly A duopoly (from Greek δύο, ''duo'' "two" and πωλεῖν, ''polein'' "to sell") is a type of oligopoly where two firms have dominant or exclusive control over a market. It is the most commonly studied form of oligopoly due to its simplicity ...

oligopoly An oligopoly (from Greek ὀλίγος, ''oligos'' "few" and πωλεῖν, ''polein'' "to sell") is a market structure in which a market or industry is dominated by a small number of large sellers or producers. Oligopolies often result from ...

oligopsony An oligopsony (from Greek ὀλίγοι (''oligoi'') "few" and ὀψωνία (''opsōnia'') "purchase") is a market form in which the number of buyers is small while the number of sellers in theory could be large. This typically happens in a marke ...

and

monopsony In economics, a monopsony is a market structure in which a single buyer substantially controls the market as the major purchaser of goods and services offered by many would-be sellers. The microeconomic theory of monopsony assumes a single entity ...

Areas of study

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

Price discrimination Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are sold at different prices by the same provider in different markets. Price discrimination is distinguished from product different ...

Product differentiation In economics and marketing, product differentiation (or simply differentiation) is the process of distinguishing a product or service from others to make it more attractive to a particular target market. This involves differentiating it from co ...

Durable good In economics, a durable good or a hard good or consumer durable is a good that does not quickly wear out or, more specifically, one that yields utility over time rather than being completely consumed in one use. Items like bricks could be cons ...

s *

Experience good Economists and marketers use of the Search, Experience, Credence (SEC) classification of goods and services, which is based on the ease or difficulty with which consumers can evaluate or obtain information. These days most economics and marketers tr ...

s *

Secondary market The secondary market, also called the aftermarket and follow on public offering, is the financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold. The initial sale of the s ...

s, which can affect the behaviour of firms in primary markets. *

Collusion Collusion is a deceitful agreement or secret cooperation between two or more parties to limit open competition by deceiving, misleading or defrauding others of their legal right. Collusion is not always considered illegal. It can be used to att ...

Signalling In signal processing, a signal is a function that conveys information about a phenomenon. Any quantity that can vary over space or time can be used as a signal to share messages between observers. The ''IEEE Transactions on Signal Processing'' ...

, such as warranties and advertising. *

Mergers and acquisitions Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect ...

Entry Entry may refer to: *Entry, West Virginia, an unincorporated community in the United States *Entry (cards), a term used in trick-taking card-games *Entry (economics), a term in connection with markets * ''Entry'' (film), a 2013 Indian Malayalam fil ...

and

Exit Exit(s) may refer to: Architecture and engineering * Door * Portal (architecture), an opening in the walls of a structure * Emergency exit * Overwing exit, a type of emergency exit on an airplane * Exit ramp, a feature of a road interchange A ...

History of the field

A 2009 book ''Pioneers of Industrial Organization'' traces the development of the field from

Adam Smith Adam Smith (baptized 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the thinking of political economy and key figure during the Scottish Enlightenment. Seen by some as "The Father of Economics"——� ...

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>

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, Luís 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 (ak
IOCB
”, 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

{{Authority control Market (economics)