• Organizational Economics
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Organizational Economics

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A wide-ranging introduction to the foundations and applications of organizational economics—essential for theorists and empiricists across a broad range of fieldsThe rapidly expanding field of orga...
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  • Publication Date: 05 January 2027
  • ISBN: 9780691096476
  • Pages: 464
  • Imprint: Princeton University Press
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A wide-ranging introduction to the foundations and applications of organizational economics—essential for theorists and empiricists across a broad range of fields

The rapidly expanding field of organizational economics studies the activities and interactions of organizations of all kinds, from the firms that are key participants in nearly all economic activity to nonprofits, schools, government agencies, hospitals, political parties, religious groups, labor unions, and more. Organizational Economics introduces students and practitioners to the governance mindset, an innovative, unified approach to understanding how organizations manage difficult transactions. It sheds light on the frictions that plague these difficult transactions as well as the wide variety of instruments that organizations use to manage these frictions. By analyzing foundational models and applying those models to some of the core problems that organizations must face, this comprehensive textbook demonstrates how governance works in the economy and identifies ways for managers, policymakers, and economists to help governance and the economy work better.

  • Introduces foundational theories in organizational economics and applies those theories to model important issues that real organizations face
  • Takes seriously the conditions under which parties actively manage their interactions rather than governing them by an arms-length transaction, either by choice or necessity
  • Covers foundational theories of incentives, control, influence, and relationships
  • Applies these models to important topics in organizational economics, including personnel economics, authority, organizational structure, firm boundaries, and interfirm relationships
  • Includes problems uniquely designed to help readers engage with the large and growing research literature
  • Identifies future directions for research
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Price: $85.00
Pages: 464
Publisher: Princeton University Press
Imprint: Princeton University Press
Publication Date: 05 January 2027
ISBN: 9780691096476
Format: Hardcover
Daniel V. Barron is associate professor of strategy at Northwestern University’s Kellogg School of Management. Robert S. Gibbons is the Sloan Distinguished Professor of Management at MIT’s Sloan School of Management and professor in MIT’s Department of Economics. His books include (with John Roberts) The Handbook of Organizational Economics (Princeton). Michael L. Powell is professor of strategy at Northwestern University’s Kellogg School of Management.
  • Figures
  • Tables
  • 1. Organizational Economics
    • 1.1. A Governance Mindset
    • 1.2. Early Contributions to Organizational Economics (with Implications for Today)
      • 1.2.1. Incomplete Contracts
      • 1.2.2. Internal Organization
      • 1.2.3. External Organization
      • 1.2.4. Informal Governance (Within and Between Organizations)
      • 1.2.5. The Performance of Organizations (Within and Between Organizations)
      • 1.2.6. Conclusion
  • 2. Incentives
    • 2.1. Pay for Performance
      • 2.1.1. The Multitask Problem—“You Get What You Pay For”
      • 2.1.2. Limited Liability and the Motivation–Rent Extraction Tradeoff
      • 2.1.3. Risk Aversion and the Motivation–Risk Allocation Tradeoff
      • 2.1.4. Moral Hazard in Teams
    • 2.2. Incentive Systems
    • 2.3. Incentives Beyond Formal Instruments—Career Concerns
    • 2.4. Conclusion
    • 2.5. Problems
  • 3. Control
    • 3.1. A Framework and a Benchmark
    • 3.2. The Adaptation Model
    • 3.3. The Property-Rights Model
    • 3.4. Control under Asymmetric Information
      • 3.4.1. The Adaptation Model with Asymmetric Information
      • 3.4.2. The Delegation Model
    • 3.5. Conclusion
    • 3.6. Problems
  • 4. Influence
    • 4.1. Strategic Communication
      • 4.1.1. Cheap Talk Can Be Credible When Preferences Are Partially Aligned
      • 4.1.2. Verifiable Information May be Selectively Disclosed in Equilibrium
      • 4.1.3. Costly Messages can Credibly Signal Private Information
    • 4.2. Strategic Information Management
      • 4.2.1. (Bayesian) Persuasion through Public Information Structures
      • 4.2.2. Information Structures That Are Costly to Manipulate
    • 4.3. Organizational Responses to Influence
      • 4.3.1. Delegation as a Response to Strategic Communication?
      • 4.3.2. Limiting Discretion to Manage Influence Costs
    • 4.4. Conclusion
    • 4.5. Problems
  • 5. Relationships
    • 5.1. Relational Incentive Contracts
    • 5.2. Dynamic Enforcement in Richer Environments
      • 5.2.1. Relational Adaptation
      • 5.2.2. Imperfect Public Monitoring
      • 5.2.3. Multiple Agents
    • 5.3. Formal Governance Shapes Relational Contracts
      • 5.3.1. Allocating Control to Manage Reneging Temptations
      • 5.3.2. The Interaction of Formal and Relational Incentive Contracts
    • 5.4. The Burden of Past Promises
      • 5.4.1. Why Stationarity?
      • 5.4.2. Imperfect Transfers and Backloading
      • 5.4.3. Uncoordinated Punishments
    • 5.5. Conclusion
    • 5.6. Problems
  • 6. Personnel
    • 6.1. Hiring
    • 6.2. Skill Development
      • 6.2.1. The Becker Problems: Who Pays for Training?
      • 6.2.2. Selling General-Purpose Skills Through Apprenticeships
      • 6.2.3. Motivating Firm-Specific Skills with Wage Schedules
    • 6.3. Job Assignments
      • 6.3.1. Wage and Promotion Dynamics
      • 6.3.2. Promotions Signal Productivity to the Labor Market
      • 6.3.3. Slot-Constrained Promotion Opportunities
    • 6.4. Conclusion
    • 6.5. Problems
  • 7. Real Authority
    • 7.1. Sources of Influence
      • 7.1.1. Influence from Expertise
      • 7.1.2. Influence from Inspiration
      • 7.1.3. Influence over a Group
    • 7.2. Sources of Leverage
      • 7.2.1. Implementation Leverage
      • 7.2.2. Cooperative Leverage
      • 7.2.3. Retaliatory Leverage
      • 7.2.4. Indirect Leverage
    • 7.3. Conclusion
      • 7.3.1. Politics
      • 7.3.2. Coalitions
      • 7.3.3. Power
    • 7.4. Problems
  • 8. Structure
    • 8.1. Hierarchies
      • 8.1.1. Decision-Making Hierarchies Economize on Information Costs
      • 8.1.2. Monitoring Hierarchies Provide an Efficient Way to Scale
      • 8.1.3. Knowledge Hierarchies Leverage Expertise
    • 8.2. Divisionalization
      • 8.2.1. Task Grouping in Functional versus Multidivisional Organizations
      • 8.2.2. Internal Capital Markets
      • 8.2.3. Transfer Pricing
    • 8.3. Conclusion
    • 8.4. Problems
  • 9. Boundaries
    • 9.1. Payoff Rights
      • 9.1.1. Choosing the Residual Claimant
      • 9.1.2. An Incentive-System Model of Firm Boundaries
    • 9.2. Control Rights
      • 9.2.1. An Adaptation Model of Firm Boundaries
      • 9.2.2. A Property-Rights Model of Firm Boundaries
    • 9.3. An Influence-Cost Model of Firm Boundaries
    • 9.4. Connections with Classics
      • 9.4.1. Ex Post Versus Ex Ante Inefficiencies
      • 9.4.2. Specific Investments
      • 9.4.3. Forbearance
      • 9.4.4. The Make-or-Buy Problem?
    • 9.5. Conclusion
    • 9.6. Problems
  • 10. Non-Integration
    • 10.1. Bilateral Interactions
      • 10.1.1. Joint Ventures
      • 10.1.2. Standard-Setting Organizations
      • 10.1.3. Strategic Alliances
    • 10.2. Polycentric Governance
      • 10.2.1. Supplier Pools
      • 10.2.2. Institutions
      • 10.2.3. Communities
    • 10.3. Conclusion
    • 10.4. Problems
  • 11. Frontiers
    • 11.1. Recent Empirical Intersections Between OE and Applied Microeconomics
    • 11.2. Potential Intersections Between OE and Other Disciplines
    • 11.3. Management
    • 11.4. Persistent Performance Differences
    • 11.5. Building a Shared Narrative
    • 11.6. Societal Culture and Organizational culture
  • Game Theory Appendix
  • References
  • Index