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In
economics Economics () is a social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and interact ...

economics
, industrial organization is a field that builds on the
theory of the firm The theory of the firm consists of a number of economic theories Economics () is the social science that studies how people interact with value; in particular, the production, distribution, and consumption of goods and services Goo ...
by examining the structure of (and, therefore, the boundaries between) firms and
market Market may refer to: *Market (economics) *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an island shared by Finland and Sweden Art, entertainment, and media Films *Market (1965 film), ''Market'' (1965 ...
s. Industrial organization adds real-world complications to the perfectly competitive model, complications such as
transaction cost In economics and related disciplines, a transaction cost is a cost in making any economic trade when participating in a Market (economics), market. Oliver E. Williamson defines transaction costs as the costs of running an economic system of companie ...
s, limited
information Information is processed, organised and structured data Data (; ) are individual facts A fact is something that is truth, true. The usual test for a statement of fact is verifiability—that is whether it can be demonstrated to c ...
, and
barriers to entry In theories of competition Competition arises whenever two or more parties strive for a common goal A goal is an idea of the future or desired result that a person or a group of people envision, Planning, plan and commit to achieve. Peop ...
of new firms that may be associated with
imperfect competitionIn economics, imperfect competition refers to a situation where the characteristics of an economic market do not fulfil all the necessary conditions of a perfectly competitive market, resulting in market failure. The structure of a market can sign ...
. It analyzes determinants of firm and market organization and behavior on a continuum between
competition Competition is a rivalry A rivalry is the state of two people or groups engaging in a lasting competitive relationship. Rivalry is the "against each other" spirit between two competing sides. The relationship itself may also be called "a ri ...
and
monopoly A monopoly (from Greek#REDIRECT Greek Greek may refer to: Greece Anything of, from, or related to Greece Greece ( el, Ελλάδα, , ), officially the Hellenic Republic, is a country located in Southeast Europe. Its population is approxi ...

monopoly
, 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 In chemistry Chemistry is the scientific Science () is a systematic enterprise that builds and organizes knowledge Knowledge is a familiarity or awareness, of someone or something, such as facts A fact is an occurrence in t ...
of firms in an industry. A second approach uses
microeconomic Microeconomics is a branch of mainstream economics Mainstream economics is the body of knowledge, theories, and models of economics, as taught by universities worldwide, that are generally accepted by economists as a basis for discussion. Also ...
models to explain internal firm organization and market strategy, which includes internal research and development along with issues of internal reorganization and renewal. A third aspect is oriented to
public policy Public policy is an institutionalized proposal to solve relevant and real-world problems, guided by a conception and implemented by programs as a course of action created and/or enacted, typically by a government A government is th ...
related to
economic regulation Regulatory economics is the economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics) ...
,
antitrust law Competition law is a that promotes or seeks to maintain by regulating conduct by companies. Competition law is implemented through public and private enforcement. It is also known as ''anti- law'' in China and Russia. In previous years it has ...
, and, more generally, the economic governance of law in defining property rights, enforcing contracts, and providing organizational
infrastructure Infrastructure is the set of fundamental facilities and systems that support the sustainable functionality of households and firms. Serving a country, city, or other area, including the services and facilities necessary for its economy An ec ...

infrastructure
. The extensive use of
game theory Game theory is the study of mathematical model A mathematical model is a description of a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. ...
in industrial economics has led to the export of this tool to other branches of
microeconomics Microeconomics is a branch of mainstream economics Mainstream economics is the body of knowledge, theories, and models of economics, as taught by universities worldwide, that are generally accepted by economists as a basis for discussion. Als ...
, such as
behavioral economics Behavioral economics (also, behavioural economics) studies the effects of psychological Psychology is the scientific Science () is a systematic enterprise that Scientific method, builds and organizes knowledge in the form of Te ...
and
corporate finance Corporate finance is the area of finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers a ...
. Industrial organization has also had significant practical impacts on
antitrust law Competition law is a that promotes or seeks to maintain by regulating conduct by companies. Competition law is implemented through public and private enforcement. It is also known as ''anti- law'' in China and Russia. In previous years it has ...
and
competition policy Competition law is a law Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environment, ...
. The development of industrial organization as a separate field owes much to Edward Chamberlin,
Joan Robinson Joan Violet Robinson (''née'' Maurice; 31 October 1903 – 5 August 1983) was a British economist An economist is a practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and ...
, Edward S. Mason, J. M. Clark, Joe S. Bain and Paolo Sylos Labini, among others.E. T. Grether, 1970. "Industrial Organization: Past History and Future Problems", ''American Economic Review'', 60(2), pp
83
89.


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. The secondary categories are listed below with corresponding available article-preview links of
The New Palgrave Dictionary of Economics ''The New Palgrave Dictionary of Economics'' (2018), 3rd ed., is an twenty-volume reference work on economics Economics () is a social science that studies the Production (economics), production, distribution (economics), distribution, ...
Online and footnotes to their respective JEL-tertiary categories and associated New-Palgrave links.
JEL: L1
Market Structure Market structure, in economics, depicts how firms are differentiated and categorised based on the types of goods they sell (homogeneous/heterogeneous) and how their operations are affected by external factors and elements. Market structure makes it ...
, Firm Strategy, and Market Performance
JEL: L2
– Firm Objectives, Organization, and Behavior
JEL: L3
Non-profit organizations A nonprofit organization (NPO), also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in contrast with an entity that oper ...
and
Public enterprise A state-owned enterprise (SOE) or government-owned enterprise (GOE) is a business enterprise Business is the activity of making one's living or making money by producing or buying and selling Product (business), products (such as goods ...

JEL: L4
Antitrust Competition law is a law Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environmen ...
Issues and Policies
JEL: L5
Regulation Regulation is the management of complex systems A complex system is a system A system is a group of interacting Interaction is a kind of action that occurs as two or more objects have an effect upon one another. The idea of a two-way e ...
and
Industrial policy An industrial policy (IP) or industrial strategy of a country is its official strategic effort to encourage the development and growth of all or part of the economy, often focused on all or part of the manufacturing sector. The government takes me ...

JEL: L6
– Industry Studies:
Manufacturing Manufacturing is the creation or Production (economics), production of goods with the help of equipment, Work (human activity), labor, machines, tools, and chemical or biological processing or formulation. It is the essence of secondary sector ...

JEL: L7
– Industry Studies: Primary Products and Construction
JEL: L8
– Industry Studies: Services
JEL: L9
– Industry Studies:
Transportation Transport (in British English British English (BrE) is the standard dialect A standard language (also standard variety, standard dialect, and standard) is a language variety that has undergone substantial codification of grammar and ...
and
Utilities A public utility company (usually just utility) is an organization that maintains the infrastructure Infrastructure is the set of fundamental facilities and systems that support the sustainable functionality of households and firms. Serving a ...


Market structures

The common
market structure Market structure, in economics, depicts how firms are differentiated and categorised based on the types of goods they sell (homogeneous/heterogeneous) and how their operations are affected by external factors and elements. Market structure makes it ...
s studied in this field are the following: *
Perfect competition In economics Economics () is a social science Social science is the branch A branch ( or , ) or tree branch (sometimes referred to in botany Botany, also called , plant biology or phytology, is the science of plant ...
*
Monopolistic competition Monopolistic competition is a type of imperfect competitionIn economics, imperfect competition refers to a situation where the characteristics of an economic market do not fulfil all the necessary conditions of a perfectly competitive market, ...
*
Duopoly A duopoly (from Greek#REDIRECT Greek Greek may refer to: Greece Anything of, from, or related to Greece Greece ( el, Ελλάδα, , ), officially the Hellenic Republic, is a country located in Southeast Europe. Its population is approxi ...
*
Oligopoly An oligopoly (from Greek#REDIRECT Greek Greek may refer to: Greece Anything of, from, or related to Greece Greece ( el, Ελλάδα, , ), officially the Hellenic Republic, is a country located in Southeast Europe. Its population is appro ...
*
Oligopsony An oligopsony (from Greek#REDIRECT Greek Greek may refer to: Greece Anything of, from, or related to Greece Greece ( el, Ελλάδα, , ), officially the Hellenic Republic, is a country located in Southeast Europe. Its population is approx ...
*
Monopoly A monopoly (from Greek#REDIRECT Greek Greek may refer to: Greece Anything of, from, or related to Greece Greece ( el, Ελλάδα, , ), officially the Hellenic Republic, is a country located in Southeast Europe. Its population is approxi ...

Monopoly
*
Monopsony In economics, a monopsony is a market structure in which a single buyer substantially controls the market as the major purchaser of goods and services offered by many would-be sellers. The Microeconomics, microeconomic theory of monopsony assumes a ...


Areas of study

Industrial organization investigates the outcomes of these market structures in environments with *
Price discrimination Price discrimination is a microeconomic Microeconomics is a branch of mainstream economics Mainstream economics is the body of knowledge, theories, and models of economics, as taught by universities worldwide, that are generally accepted b ...
*
Product differentiation In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods a ...
*
Durable good In economics, a durable good or a hard good or consumer durable is a Good (economics), good that does not quickly wear out or, more specifically, one that yields utility over time rather than being completely Consumption (economics), consumed in ...
s * Experience goods *
Secondary market The secondary market, also called the aftermarket and follow on public offering, is the financial market A financial market is a market (economics), market in which people trade financial Security (finance), securities and derivative (finan ...
s, which can affect the behaviour of firms in primary markets. *
Collusion Collusion is a deceitful agreement or secret cooperation between two or more parties to limit open competition Competition is a rivalry A rivalry is the state of two people or groups engaging in a lasting competitive relationship. Riva ...
*
Signalling In signal processing Signal processing is an electrical engineering subfield that focuses on analysing, modifying, and synthesizing signals such as audio signal processing, sound, image processing, images, and scientific measurements. Sig ...
, such as warranties and advertising. *
Mergers and acquisitions In corporate finance Corporate finance is the area of finance that deals with sources of funding, the capital structure of corporations, the actions that managers take to increase the Value investing, value of the firm to the shareholders, ...
*
Entry Entry may refer to: *Entry, West Virginia, an unincorporated community in the United States *Entry (cards), a term used in trick-taking card-games *Entry (economics), a term in connection with markets *Entry (film), ''Entry'' (film), a 2013 Indian ...
and
Exit Exit(s) may refer to: Architecture and engineering * Door * Portal (architecture), an opening in the walls of a structure * Emergency exit * Overwing exit, a type of emergency exit on an airplane * Exit ramp, a feature of a road interchange (road ...


History of the field

A 2009 book ''Pioneers of Industrial Organization'' traces the development of the field from
Adam Smith Adam Smith ( 1723 – 17 July 1790) was a Scottish economist, philosopher as well as a moral philosopher Ethics or moral philosophy is a branch of philosophy that "involves systematizing, defending, and recommending concepts of right and ...

Adam Smith
to recent times and includes dozens of short biographies of major figures in Europe and North America who contributed to the growth and development of the discipline.Henry W. de Jong and William G. Shepherd, ed., 2007. ''Pioneers of Industrial Organization.'' Cheltenham, UK: Elgar. Description and conten
links
an
preview
Other reviews by publication year and earliest available cited works those in 1970/1937, 1972/1933, 1974, 1987/1937-1956 (3 cites), 1968-9 (7 cites). 2009/c. 1900,Lefteris Tsoulfidis, 2009. "Between Competition and Monopoly", ''Competing Schools of Economic Thought'', ch. 9, pp
213
42
Springer
/ref> and 2010/1951.Liran Einav and Jonathan Levin, 2010. "Empirical Industrial Organization: A Progress Report", ''Journal of Economic Perspectives'', 24(2), pp
145–162.
/ref>


See also

*
Bertrand competitionBertrand competition is a model of competition used in economics, named after Joseph Louis François Bertrand (1822–1900). It describes interactions among firms (sellers) that set prices and their customers (buyers) that choose quantities at the p ...
*
Bertrand–Edgeworth model In microeconomics Microeconomics (from Greek prefix ''mikro-'' meaning "small" + ''economics'') is a branch of economics that studies the behavior of individuals and Theory of the firm, firms in making decisions regarding the allocation of sc ...
*
Competition policy Competition law is a law Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environment, ...
*
Cournot competition Cournot competition is an economic An economy (from Greek language, Greek οίκος – "household" and νέμoμαι – "manage") is an area of the Production (economics), production, Distribution (economics), distribution and trade, as well ...

Cournot competition
*
Input-output model In computing Computing is any goal-oriented activity requiring, benefiting from, or creating computing machinery. It includes the study and experimentation of algorithmic processes and development of both computer hardware , hardware and soft ...
* Important publications in industrial organization * Structure-conduct-performance paradigm


Notes


References

* Belleflamme, Paul & Martin Peitz, 2010. ''Industrial Organization: Markets and Strategies''. Cambridge University Press
Summary
an
Resources
* Cabral, Luís M. B., 2000. ''Introduction to Industrial Organization''. MIT Press. Links t
Description
and chapter-previe
links.
* Shepherd, William, 1985. ''The Economics of Industrial Organization'', Prentice-Hall. * Shy, Oz, 1995. ''Industrial Organization: Theory and Applications''
Description
and chapter-previe
links.
MIT Press. * Vives, Xavier, 2001. ''Oligopoly Pricing: Old Ideas and New Tools''. MIT Press
Description
and scroll to chapter-previe
links.
* Jeffrey Church & Roger Ware, 2005. "Industrial Organization: A Strategic Approach", (ak

”, Free Textbook * Nicolas Boccard, 2010. "Industrial Organization, a Contract Based approach (ak
IOCB
”, Open Source Textbook


Journals


''International Journal of the Economics of Business''
and issue previe
links

''International Journal of Industrial Organization''
and issue-previe
links

''Journal of Industrial Economics''Aims and Scope
and issue-previe
links.

''Journal of Law, Economics, and Organization''
and issue-previe
links.
* '' Review of Industrial Organization''


External links

{{Authority control Market (economics)