Objective

Upon completing this course, you will understand the basis economic principles underlying many organizations and institutions that characterise the modern economy. The tools this course provides you with will prove useful in understanding many aspect of the organizations where you will find yourself working within some years.

Content

Although microeconomic analysis is typically associated with the analysis of markets, this course shows that organizations can be analysed using microeconomic tools. The economics of organizations is one of the liveliest areas of current research in economics and has fostered a wealth of insights into hitherto unexplained features of organizations.

The course discusses three areas of interest. First of all, we will see what contemporary economists have to say about Coasian transaction cost economics and the related choice of markets or organizations as means of completing transactions. Secondly, we will study how organizations like firms provide incentives to their employees to stimulate good performance. Here, we will use the theory of contract and the literature on agency. Thirdly, we will look at the problem of an organizational designer (like a CEO, a vice-president Strategy or Human Resources): how should the various part of an organization be related? How does the organizational structure determine the flow of information within the organization and therefore the decisions taken? Here we make use of the literature on organizations as information processing entities.

I will use examples based on my work experience at Royal Dutch/Shell to illustrate the theory.

Required Literature

Reader and probably some book.

					5-7-2002