MECS 570-1: Organizational Economics I: Organizations and Markets

This is the first course in a two-course sequence in Organizational Economics. It provides an introduction to the field and focuses on issues of incentive provision, decision making, firm boundaries, organizational structures and processes, and the interaction between firm organization and the broader economy. Below is the syllabus, an outline of the course, and a series of lecture notes. The class now meets in the Global Hub, room 4273 on Tuesdays and Thursdays from 9:00am-10:30am. 


Lecture Notes

Collection of Lecture Notes for Spring, 2016: Contains all the notes below and a couple other topics from previous quarters

Introduction (Updated: January 5th, 2017)

Incentives in Organizations, Part I (Updated: January 5th, 2017): Risk-Incentives Trade-off

Incentives in Organizations, Part II (Updated: January 10th, 2017): Limited-Liability and Misaligned Performance Measures

Incentives in Organizations, Part III (Updated: January 14th, 2017): Career Concerns

Incentives in Organizations, Part IV (Updated: January 14th, 2017): Relational Incentive Contracts

Competition and Organization  (Updated: January 19th, 2017): Competition and Managerial Incentives

Boundaries of the Firm, Part I (Updated: January 25th, 2017): Introduction; Transaction-Cost Economics

Boundaries of the Firm, Part II (Updated: February 2nd, 2017): Property Rights Theory; Foundations of Incomplete Contracts

Boundaries of the Firm, Part III (Updated: February 7th, 2017): Influence Costs

Boundaries of the Firm, Part IV (Updated: February 9th, 2017): Organizational Industrial Organization

Decision Making in Organizations, Part I (Updated: February 16th, 2017): Mechanism-Design Approach to Delegation

Decision Making in Organizations, Part II (Updated: February 21st, 2017): Delegating Non-Contractible Decisions

Organizational Structure, Part I (Updated: February 24th, 2017): Span of Control, Knowledge Hierarchies

Organizational Structure, Part II (Updated: February 28th, 2017): Knowledge Hierarchies and Inequality; Monitoring Hierarchies

Careers in Organizations (Previously updated: May 24, 2016): Internal Labor Markets

Performance Differences (Previously updated: May 13th, 2015): Productivity Measures

Relational Incentive Contracts (Previously updated: May 24th, 2015): Sequential Inefficiencies in Formal and Relational Contracts (by Dan Barron)

Schedule (updated January 14, 2017)

Week 1:
Thurs, Jan 5: Introduction to Organizational Economics; Risk--Incentives Trade-off

Week 2:
Tues, Jan 10: Limited Liability; Misaligned Performance Measures
Thurs, Jan 12: Career Concerns

Week 3:
Tues, Jan 17: Relational Incentive Contracts
Thurs, Jan 19: Competition and Relational Incentive Contracts

Week 4:
Tues, Jan 24: Competition and Managerial Incentives
Thurs, Jan 26: Discussion of Hewlett-Packard case; Introduction to Firm Boundaries

Week 5:
Tues, Jan 31: Transaction Cost Economics
Thurs, Feb 2: Property Rights Theory; Foundations of Incomplete Contracts
Sun, Feb 5: First model-development essay due

Week 6:
Tues, Feb 7: Influence Costs
Thurs, Feb 9: Organizational IO; Communicating Soft and Hard Information

Week 7:
Thurs, Feb 16: Mechanism-Design Approach to Delegation

Week 8:
Tues, Feb 21: Delegation with Non-contractible Decisions
Thurs, Feb 23: Span of Control; Knowledge Hierarchies

Week 9:
Tues, Feb 28: Knowledge Hierarchies in Equilibrium
Thurs, Mar 2: Centralization versus Decentralization

Week 10:
Tues, Mar 7: Discussion of Limits of Organization; Discussion of Firm Objectives
Thurs, Mar 9: Monitoring Hierarchies and Firm Size; Student Presentation
Sun, Mar 12: Second model-development essay due