Elements of Industrial Organization

P. K. Rao
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P. K. Rao: Global Development Institute

Chapter 2 in The Economics of Transaction Costs, 2003, pp 26-40 from Palgrave Macmillan

Abstract: Abstract There is always the issue of organization of industry (rather, the issue of efficient organization), whether or not there exists a formal subject called ‘industrial organization’ (Stigler, 1968). According to a later assessment of the subject (Phillips and Stevenson, 1974, p. 324), the principal concerns of industrial organization relate to the application of microeconomics ‘to the problem of monopoly, restraints of trade, and the public regulation and ownership of enterprise’. However, as the theme lends itself to multiple ramifications, there have been several additions to the issues (such as firm hierarchies and decentralization) and analytical methods or approaches (such as incomplete contracts theory, and applications of the economics of asymmetric information; see Chapters 3 and 4 for some of the details) for their analyses. The theory and practice of industrial organization forms a significant foundation for the development of the economics of transaction costs (TC). Historically, some of the foundations were laid during the pre-Second World War era to explain the economics of organization of markets and firms, and the determinants of firm boundaries. It took a few decades for the economics profession to appreciate the arguments of some of the early foundations. Coase (1937) raised and provided an explanation for the simple question: Why do firms exist?

Keywords: Transaction Cost; Industrial Organization; Agency Cost; Vertical Integration; Dynamic Capability (search for similar items in EconPapers)
Date: 2003
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DOI: 10.1057/9780230597686_2

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