Production and Organizations

Production and organizations (JEL D2) analyses how firms produce and how economic activity is organized within and between firms.

Scope

It covers production and cost, the theory of the firm, firm boundaries, transaction costs, and the internal organization of production.

Sub-topics

• General
• Firm Behavior: Theory
• Firm Behavior: Empirical Analysis
• Organizational Behavior • Transaction Costs • Property Rights
• Production • Cost • Capital • Capital, Total Factor, and Multifactor Productivity • Capacity
• Intertemporal Firm Choice: Investment, Capacity, and Financing
• Crowd-Based Firms
• Other

Core questions

• How do firms produce efficiently?
• Why do firms exist and where are their boundaries?
• How do transaction costs shape organization?
• How is production organized internally?

Key concepts

• Production and cost functions
• Transaction costs
• Firm boundaries
• Asset specificity
• Governance structures
• Make-or-buy

Key theories

The nature of the firm

Coase explained the firm as a response to the transaction costs of using the market.

Transaction-cost economics

Williamson developed the analysis of governance structures and asset specificity.

History

The economics of production and organization runs from neoclassical production theory through Coase's theory of the firm to Williamson's transaction-cost economics.

Debates

Markets versus hierarchies

When activity is best coordinated by markets versus organized within firms.

Key figures

• Ronald Coase
• Oliver Williamson

Seminal works

• coase-1937
• williamson-1985

Frequently asked questions

What are transaction costs?

The costs of using the market — searching, bargaining, and enforcing contracts — that help determine whether activity occurs in firms or markets.