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 meets in the Global Hub, room 4301 on Thursdays from 3:30pm-6:30pm. 


Lecture Notes

Collection of Lecture Notes for Spring, 2017: Contains all the notes below, a couple other topics from previous quarters, and a few topics from 570-2.

Introduction (Updated: September 21st, 2017)

Incentives in Organizations, Part I (Updated: September 21st 2017): Risk-Incentives Trade-off; Limited Liability; Misaligned Performance Measures

Incentives in Organizations, Part II (Previously updated: January 14th, 2017): Career Concerns

Incentives in Organizations, Part III (Previously updated: January 14th, 2017): Relational Incentive Contracts

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

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

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

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

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

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

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

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

Organizational Structure, Part II (Previously 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 September 21, 2017)

Week 1--Thurs, Sep 21: Introduction to Organizational Economics; Risk--Incentives Trade-off; Limited Liability

Week 2--Thurs, Sep 28: Misaligned Performance Measures; Career Concerns; Relational Incentive Contracts

Week 3--Thursday, Oct 5: Competition and Relational Incentive Contracts; Competition and Managerial Incentives

Week 4--Thurs, Oct 12: Discussion of Hewlett-Packard Case; Firm Boundaries; Transaction Cost Economics

Week 5--Thurs, Oct 19: Property Rights Theory; Foundations of Incomplete Contracts; Organizational IO
Sun, Oct 22: First model-development essay due

Week 6--Thurs, Oct 26: Communication; Mechanism-Design Approach to Delegation

Week 7--Thursday, Nov 2: Delegation with Non-Contractible Decisions; Centralization versus Decentralization

Week 8--Thursday, Nov 9: Span of Control; Knowledge Hierarchies; Knowledge Hierarchies in Equilibrium

Week 9--Thursday, Nov 16: Monitoring Hierarchies and Firm Size; Discussion of Limits of Organization and Firm Objectives

Week 10--Thursday, Nov 30: Internal Labor Markets
Sun, Dec 3Second model-development essay due