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Industrial organization

industrial organizational psychology, industrial organization model
In economics, industrial organization or Industrial economy 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, and barriers to entry of new firms that may be associated with imperfect competition It analyzes determinants of firm and market organization and behavior as between competition and monopoly, 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 as to economic regulation, antitrust law, and, more generally, the economic governance of law in defining property rights, enforcing contracts, and providing organizational infrastructure

The subject has a theoretical side and a practical side According to one textbook: "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

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

The development of industrial organization as a separate field owes much to Edward Chamberlin, Edward S Mason, J M Clark, and particularly Joe S Bain among others

Assessments of the subject have differed over time The preface to a related research volume in 1972 remarked on Whither industrial organization: "That all is not well with this in this once flourishing field is readily apparent" A response came 15 years later: "oday's verdict is that industrial organization is alive and well and the queen of applied microeconomics"


  • 1 Subareas
  • 2 Market structures
  • 3 Areas of study
  • 4 History of the field
  • 5 See also
  • 6 Notes
  • 7 References
  • 8 Journals
  • 9 External links


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 enterprise JEL: L4 – Antitrust Issues and Policies JEL: L5 – Regulation and Industrial policy JEL: L6 – Industry Studies: Manufacturing JEL: L7 – Industry Studies: Primary Products and Construction JEL: L8 – Industry Studies: Services JEL: L9 – Industry Studies: Transportation and Utilities

Market structures

The common market structures studied in this field are the following:

  • Perfect competition
  • Monopolistic competition
  • Duopoly
  • Oligopoly
  • Oligopsony
  • Monopoly
  • Monopsony

Areas of study

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

  • Price discrimination
  • Product differentiation
  • Durable goods
  • Experience goods
  • Secondary markets, which can affect the behaviour of firms in primary markets
  • Collusion
  • Signalling, such as warranties and advertising
  • Mergers and acquisitions
  • 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

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, and 2010/1951

See also

Main article: Outline of industrial organization
  • Bertrand competition
  • Bertrand–Edgeworth model
  • Competition policy
  • Cournot competition
  • Input-output model
  • Important publications in industrial organization
  • Structure-conduct-performance paradigm


  1. ^ • R H Coase, 1937 "The Nature of the Firm", Economica, NS, 416, pp 386–405
     • _____, 1988 "The Nature of the Firm: Influence", Journal of Law, Economics, & Organization, 41, 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, 824, pp 713–719
     • Oliver E Williamson, 1981 "The Economics of Organization: The Transaction Cost Approach", American Journal of Sociology, 873, pp 548–577
     • _____, 2009 "Transaction Cost Economics: The Natural Progression", Nobel Lecture Reprinted in 2010, American Economic Review, 1003, pp 673–90
  2. ^ George J Stigler, 2008 "competition", The New Palgrave Dictionary of Economics, 2nd Edition Abstract
  3. ^ • 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, 163, 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
  4. ^ • 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, 201, 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 Archived May 3, 2011, at the Wayback Machine
  5. ^ 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
  6. ^ • 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 Abstract Archived September 5, 2015, at the Wayback Machine
  7. ^ • 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
  8. ^ • 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, 98392, 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, chapter outlines, and preview
  9. ^ Exemplified in such advanced textbooks as Jean Tirole, 1988, The Theory of Industrial Organization, MIT Press, description and chapter-preview links
  10. ^ • 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: EH Chamberlin's Influence on Industrial Organisation Theory over Sixty Years", Journal of Economic Studies, 141, 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–
  11. ^ Edward S Mason, 1939 "Price and Production Policies of Large-Scale Enterprise", American Economic Review, 291, Supplement, pp 61–74
     • _____, 1949 "The Current Status of the Monopoly Problem in the United States", 'Harvard Law Review, 628, 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
  12. ^ JM 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
  13. ^ • 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
  14. ^ a b E T Grether, 1970 "Industrial Organization: Past History and Future Problems", American Economic Review, 602, pp 83–89
  15. ^ Oliver E Williamson, ed, 1990 Industrial Organization, Edward Elgar Description and article list 23 articles, dating from 1937 to 1987 Archived July 22, 2011, at the Wayback Machine
  16. ^ Victor R Fuchs, ed, 1972 "Preface" scrollable down, Policy Issues and Research Opportunities in Industrial Organization, NBER, p xv
  17. ^ Oliver E Williamson, 1987 "Delimiting Antitrust", Georgetown University Law Review, December 76, p 303 Reprinted in Williamson 1996, The Mechanisms of Governance, p 306 snippet
  18. ^ A complete list of the JEL Industrial Organization codes is at JEL classification codes#Industrial organization JEL: L Subcategories
  19. ^ 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
  20. ^ 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
  21. ^ JEL: L31 – Nonprofit Institutions; NGOs
    JEL: L32 – Public enterprises; Public-Private Enterprises
    JEL: L33 – Comparison of Public and Private Enterprises; Privatization; Contracting out
  22. ^ 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
  23. ^ JEL: L51 – Economics of Regulation
    JEL: L52 – Industrial Policy; Sectoral Planning Methods
    JEL: L53] – Enterprise Policy
  24. ^ 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
  25. ^ 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
  26. ^ 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
  27. ^ 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
  28. ^ Henry W de Jong and William G Shepherd, ed, 2007 Pioneers of Industrial Organization Cheltenham, UK: Elgar Description and content links and preview Archived August 7, 2011, at the Wayback Machine
  29. ^ 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
  30. ^ Almarin Phillips and Rodney E Stevenson, 1974 "The Historical Development of Industrial Organization", History of Political Economy, 63, pp 324–342 In Papers from the First Conference of the History of Economics Society Citation
  31. ^ Timothy F Bresnahan and Richard Schmalensee, 1987 "The Empirical Renaissance in Industrial Economics: An Overview", Journal of Industrial Economics, 354, pp 371–378
  32. ^ Lefteris Tsoulfidis, 2009 "Between Competition and Monopoly", Competing Schools of Economic Thought, ch 9, pp 213–42 Springer
  33. ^ Liran Einav and Jonathan Levin, 2010 "Empirical Industrial Organization: A Progress Report", Journal of Economic Perspectives, 242, pp 145–162


  • Paul Belleflamme and 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 ISBN 0-13-231481-9
  • 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”, Free Textbook
  • Nicolas Boccard, 2010 "Industrial Organization, a Contract Based approach aka IOCB”, Open Source Textbook


  • International Journal of the Economics of Business and issue preview links
  • International Journal of Industrial Organization and issue-preview links
  • Journal of Industrial Economics, Aims and Scope, and issue-preview links
  • Journal of Law, Economics, and Organization and issue-preview links
  • Review of Industrial Organization and issue-preview links

External links

  • Quotations related to Industrial organization at Wikiquote

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