Industrial organization

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,[1] 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[2] and monopoly,[3] 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.[4] A third aspect is oriented to public policy as to economic regulation,[5] antitrust law,[6] and, more generally, the economic governance of law in defining property rights, enforcing contracts, and providing organizational infrastructure.[7][8]

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.[9]

The development of industrial organization as a separate field owes much to Edward Chamberlin,[10] Joan Robinson, Edward S. Mason,[11] J. M. Clark,[12] Joe S. Bain[13] and Paolo Sylos Labini, among others.[14][15]

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.[16] 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: L1Market Structure, Firm Strategy, and Market Performance[17]
JEL: L2 – Firm Objectives, Organization, and Behavior[18]
JEL: L3Non-profit organizations and Public enterprise[19]
JEL: L4Antitrust Issues and Policies[20]
JEL: L5Regulation and Industrial policy[21]
JEL: L6 – Industry Studies: Manufacturing[22]
JEL: L7 – Industry Studies: Primary Products and Construction[23]
JEL: L8 – Industry Studies: Services[24]
JEL: L9 – Industry Studies: Transportation and Utilities[25]