| Description |
Most of Economics treats firms as individual economic decision-makers, thereby abstracting from the fact that a firm’s actions might depend on its internal organization. Organizational Economics opens a black box by shining light on the effects of firm organization.
It uses rigorous economic modelling to obtain an understanding of how firm structure maps into firm performance.
The course can be divided into four part. Part A deals with the traditional problem of the nature of the firm by considering the choice between integration and outsourcing. We introduce the property-rights theory by Oliver Hart and John Moore and the incentive-systems approach by Paul Milgrom and Bengt Holmstrom. Part B deals with pay and compensation. We introduce Holmstrom's classic principal-agent framework and Edward Lazear's theory of labour-tournaments before studying the important concept of Relative Performance Evaluation. Part C considers the internal organization of the firm. We study the challenges faced by team production and consider the determinants of optimal hierarchies. We learn to distinguish formal and real authority using Phillipe Aghion and Jean Tirole's model of delegation, and learn how decision-making interacts with incentives. Finally, Part D summarizes the empirical findings about the determinant's of a firm's success with a special focus on the role of direction. Leadership and managerial vision turn out to be crucial factors and we use the seminal models by Benjamin Hermalin and Eric Van den Steen to understand the importance of these concepts.
Organizational Economics is an emerging field at the boundary between Economics and Business. The course is therefore well suited for students of a Bachelor or Master in Economics or Business. It is self-contained but requires knowledge of basic game theoretic concepts. Language is English.
In most topics we discuss a few key papers. A general overview over the topics can be obtained from the respective chapters in the books cited below. The list of papers is not meant to be a complete description of the literature. It only contains the papers that will be discussed in class and students may want to read some of these papers directly.
Literature:
Bolton, P. and M. Dewatripont, Contract Theory, 2005, MIT Press.
Gibbons, R. and J. Roberts, Organizational Economics, forthcoming, Princeton University Press.
Gibbons, R. and J. Roberts, Handbook of Organizational Economics, 2013, Princeton University Press.
Holmstrom, B. and J. Tirole, The Theory of the Firm, 1989, Handbook of Industrial Organization.
Credits: 3 SWS / 4.5 ECTS
Prerequisites: Introduction to Game Theory
The lecture is open to both BA and MSc students
Evaluation: written exam in English
Lecture: Wednesday, 10.15-12.00h, 115, H4
**** please note lecture September 18th is cancelled, first lecture takes place September 25th ****
Exercises with Moritz Weik, Wednesday, 09.15.10.00 hrs, 115,H4
1st exam: Wednesday, 18.12.2024, 10.15-11.45h, 115, H4
2nd exam: Wednesday, 12.02.2025, 10.15-11.45h, tba |
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