Economic activity is organized by means of different institutional arrangements. The extreme cases are markets and hierarchies. The objective of this course is to help students understand why certain institutions perform better than others under given circumstances. In order to do that, we develop two basic groups of tools: The theory of Transaction Costs and Agency Theory. We apply this theoretical machinery to several problems: From the choice of the most suitable organizational form in order to achieve a given objective, to the problem of how to set up incentive mechanisms that are effective in, eg, personnel policy or procurement.
1. Markets. General Equilibrium. Basic Assumptions. Efficiency Properties and Welfare. Uncertainty and Time. Welfare under uncertainty: Optimal risk sharing. Market failures: Externalities and Public Goods. The Coase Theorem. Market incompleteness. 2. Transaction costs. The firm according to Coase. Definition and sources of transaction costs. Incompleteness of contracts. Bounded rationality. Asset specificity. Vertical integration. 3. Asymmetric information: imperfectly observable actions. Insurance and moral hazard. Moral hazard in firms: employee and managerial behavior. Incentive contracts and the principal and agent problem. Incentive mechanisms in organizations. 4. Asymmetric information: imperfectly observable characteristics. Private information. Insurance markets and adverse selection. Regulation and private information. Signaling. Screening mechanisms. 5. Incentives and human resources management. Selection. Internal labor markets. Incentive payment. Performance evaluation. Job design. Incentive pay for teams and team production. 6. Corporate governance. Separation of property and control. Interest conflicts in corporations. Financial structure and incentives. Signaling and finalcial decisions. Corporate control. Equity pay. 7. Modern organizational trends. History of organizational forms. Vertical boundaries of the firm. Strategic alliances and networks. Information technologies and the modern firm. Innovation and organization.
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David Besanko, David Dranove, Mark Shanley, Scott Schaefer (2004). Economics of Strategy (3). Wiley. Catàleg James Brickley, Clifford Smith, Jerold Zimmerman (2004). Managerial Economics and Organizational Architecture (3). McGraw Hill. Catàleg Paul Milgrom, John Roberts (1992). Economics, Organization and Management. Prentice Hall. Catàleg
Activitats d'avaluació: Descripció de l'activitat Avaluació de l'activitat % Besides some lectures at the beginning of the course in which we present required material, much of the course will be devoted to the presentation and discussion of articles, either from the specialized press or from academic sources. Each year we update the collection of articles presented in class, so we keep at the boundary of knowledge in the area, and also we discuss topics that are currently being publicly debated. Students are encouraged (though not obligatorily required) to present and discuss articles in class. (The presentations need not be in English, as long as the language used is commonly understood.) Those students that do so will have a bonus towards the final grade.
Along the course we will regularly have (multiple choice) tests that will refer to the material recently covered in class. The course grade will be the average of the results of those tests (excepting that test in which each student has performed worse, which will not count towards the grade). Students who have participated in in-class presentations will have also a bonus added to this average. Those students who have not obtained the minimum grade, or those wishing to improve their grade, may also take a final exam. The final grade will be the maximum between the above mentioned course grade and the result of the final exam. For those who take the make-up exam in September, the grade will correspond entirely to the result of that exam.
The articles to be discussed in class will be posted in the course webpage. Suggestions from students are also welcome.