- Industrial organization
Industrial Organization is a field of
economics that studies the strategic behavior of firms, the structure ofmarkets and their interactions. The study of industrial organization adds to the perfectly competitive model real-world frictions such as limited information, transaction cost, cost of adjusting prices, government actions, and barriers to entry by new firms into a market. It then considers how firms are organized and how they compete. [Modern Industrial Organization 4th edition, Dennis W. Carlton and Jeffery M. Perloff, Overview: page 1]Perhaps a most appropriate term is the "Economics of Imperfect Competition". The development of industrial organization as a separate field owed much to
Edward Chamberlin , Edward S. Mason andJoe S. Bain .For most of the post-WW II era the central paradigm of industrial organization was the Structure-Conduct-Performance or SCP-model. Since the 1980's theoretical analysis in the field has become heavily based ongame theory [It should not be confused with the related psychological area,Industrial and organizational psychology .] .The common market structures studied in this field are the following:
*Perfect competition
*Monopolistic competition
*Oligopoly
*Oligopsony
*Monopoly
*Monopsony Industrial organization investigates the outcomes of these market structures in environments with
*Price discrimination
*Product differentiation
*Durable goods
*Experience goods
*Secondary markets orsecond-hand markets , which can affect the behaviour of firms in primary markets.
*Collusion
*Signaling, such as warranties and advertising.
*Mergers andacquisitions
*Entry andExit A competitive market structure has the performance outcome of lower costs and lower prices, (Shepherd, W: 1997:4).
The subject has a theoretical side and a practical side. According to one text book: "On one plane the field is abstract, a set of analytical concepts about competition and monopoly. On a second plane the topic is about real markets, teeming with the excitement and drama of struggles among real firms" (Shepherd, W.; 1985; 1).
Since game theory has been used more extensively in industrial economics, this has also led to export of this tool to other branches of
microeconomics , such asorganization economics andcorporate finance . Industrial organization has also had significant practical impacts onantitrust law andcompetition policy .Footnote
External references
* Scherer, Frederic M., and David Ross (1990). "Industrial Market Structure and Economic Performance", Houghton-Mifflin, 3rd ed.
* Shepherd, William (1985). "The Economics of Industrial Organization", Prentice-Hall. ISBN 0-13-231481-9
* Schmalensee, Richard (1987). Industrial Organization, "", v. 2, pp. 803-08.
* Shy, Oz (1995) [http://mitpress.mit.edu/catalog/item/default.asp?ttype=2&tid=4262 "Industrial Organization: Theory and Applications"] MIT Press.
*Tirole, Jean (1988) [http://mitpress.mit.edu/catalog/item/default.asp?ttype=2&tid=8224 "The Theory of Industrial Organization"] MIT Press.
* Vives, Xavier (2001) [http://mitpress.mit.edu/catalog/item/default.asp?ttype=2&tid=8556 "Oligopoly Pricing: Old Ideas and New Tools"] MIT Press.ee also
*Important publications in industrial organization
*List of topics in industrial organization
*Competition policy
*Cournot competition
*Bertrand competition
*Input-output model
*Competition law
*Relevant market
*SSNIP
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