ECON224

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The Economics of Institutions

ECON 224 2009 - The Economics of Institutions is a class offered to doctoral students at UC Berkeley, and is a field requirement for PhDs in BPP at the Haas School of Business.

Econ 224 2011

This section details the course as it was taught by Steve Tadelis and Noam Yuchtman the Spring of 2011.

Tadelis Readings

  • Alchian Demsetz (1972) - Production Information Costs And Economic Organization, American Economic Review, Vol. 62, No. 5. (Dec., 1972), pp. 777-795. Available in JSTOR.
  • Holmström, Bengt (1979) "Moral Hazard and Observability." Bell Journal of Economics 10(1): 74-91.
  • Gibbons, Robert (1998) "Incentives in Organizations" The Journal of Economic Perspectives, 12(4):115-132.
  • Coase (1937) - The Nature Of The Firm, Economica, Available in JSTOR
  • Williamson (1979) - Transaction Cost Economics: The Governance of Contractual Relations," Journal of Law and Economics, Vol. 22, No. 2. (Oct., 1979), pp. 233-261. Availabe in JSTOR.
  • Barzel, Yoram (1982) fMeasurement Cost and the Organization of Markets, Journal of Law and Economics, 25(1):27-48
  • Bajari, Patrick and Steven Tadelis (2001), "Incentives versus Transaction Costs: A Theory of Procurement Contracts", The RAND Journal of Economics, Vol. 32, No. 3, Autumn, pp. 387-407 pdf
  • Holmstrom Roberts (1999) - The Boundaries Of The Firm Revisited, Journal of Economic Perspectives, 12(4):73-9
  • MacLeod, W. Bentley (2003), "Optimal Contracting with Subjective Evaluation," American Economic Review 93(1):216-40.
  • Hayek, F. A. "The Use of Knowledge in Society," American Economic Review 35(4):
  • Antràs, Pol, Luis Garicano and Esteban Rossi-Hansberg (2006) "Outsourcing in a Knowledge Economy." Quarterly Journal of Economics, 121(1):31-77.

Yuchtman Readings

For the Papers below, see summaries here.

  • Acemoglu and Pischke (1998)
  • Manning (2003)
  • Lazear (2000)
  • Bandiera et al (2007)

Econ224 2009

This section details the course as it was taught by Pablo Spiller (email and website) in the Spring of 2009.

Readings

The course readings (zip file), by lecture, were listed as follows:

1.) Institutions

  • North, Douglass (1991), "Institutions", Journal of Economic Perspectives pdf
  • Williamson, Oliver (2000), "New Institutional Economics: Taking Stock, Looking Ahead", Journal of Economic Literature pdf
  • Williamson, Oliver (1998), "The Institutions of Governance", American Economic Review, Papers and Proceedings pdf
  • Palay, Thomas M. (1985), "Avoiding Regulatory Constraints: Contracting Safeguards and the Role of Informal Agreements". Journal of Law, Economics, and Organization. 1 (1): 155-175 pdf
  • Goldberg, Victor, P. (1990), "Aversion to Risk Aversion in the New Institutional Economics," Journal of Institutional and Theoretical Economics, March, 216-222. pdf

2.) Thinking Institutionally: The Problem of Commitment

  • Klein, Benjamin Robert, G. Crawford, and Armen A. Alchian (1978), "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process", Journal of Law and Economics, Vol. 21, No. 2. (Oct.), pp. 297-326 pdf
  • Williamson, Oliver, (1983), "Credible Commitments: Using Hostages to Support Exchange", The American Economic Review, Vol. 73, No. 4. pp. 519-540 pdf
  • Williamson, Oliver (1991), "Comparative Economic Organization: The Analysis of Discrete Structural Alternatives", Administrative Science Quarterly, Vol. 36, No. 2. pp. 269-296 pdf
  • Telser, Lester (1981), "A Theory of Self-Enforcing Agreements," Journal of Business, 27-44. (Optional Reading) pdf
  • Hodgson, G.M. (2004), "Opportunism is not the only reason why firms exist: why an explanatory emphasis on opportunism may mislead management strategy," Industrial and Corporate Change, 13(2), April, 401-418. (Optional Reading) pdf
  • Klein, Benjamin and Keith B. Leffler (1981), "The Role of Market Forces in Assuring Contractual Performance", The Journal of Political Economy, Vol. 89, No. 4. pp. 615-641. (Optional Reading) pdf
  • Williamson, Oliver (1988), "The Logic of Economic Organization", in Conference Papers to Celebrate the Fiftieth Anniversary of the "Nature of the Firm", Journal of Law, Economics, & Organization, Vol. 4, No. 1. pp. 65-93 (Optional Reading) pdf

3.) The Theory of the Firm

  • Alchian, Armen A. and Harold Demsetz (1972), "Production, Information Costs, and Economic Organization", The American Economic Review, Vol. 62, No. 5. (Dec.), pp. 777-795 pdf
  • Coase, Ronald (1937), "The Nature of the Firm", Economica. pdf
  • Gibbons, Robert (1998), "Incentives in Organizations", (in Symposium: The Firm and Its Boundaries) The Journal of Economic Perspectives, Vol. 12, No. 4. pp. 115-132 pdf
  • Gibbons, Robert (2004), "Four Formal(izable) Theories of the Firm?" (September 16). MIT Department of Economics Working Paper No. 04-34. pdf
  • Holmstrom, Bengt and Paul Milgrom (1994), "The Firm as an Incentive System", The American Economic Review, Vol. 84, No. 4. pp. 972-991 pdf
  • Williamson, Oliver (1979), "Transaction-Cost Economics: The Governance of Contractual Relations", Journal of Law and Economics, Vol. 22, No. 2. (Oct.), pp. 233-261. pdf
  • Fama, Eugene F. and Michael C. Jensen (1983), "Agency Problems and Residual Claims", Journal of Law and Economics, Vol. 26, No. 2, Corporations and Private Property: A Conference Sponsored by the Hoover Institution. (Jun.), pp. 327-349. (Optional Reading) pdf
  • Fama, Eugene F. and Michael C. Jensen (1983), "Separation of Ownership and Control", Journal of Law and Economics, Vol. 26, No. 2, Corporations and Private Property: A Conference Sponsored by the Hoover Institution. (Jun.), pp. 301-325. (Optional Reading) pdf
  • Hansmann H. and R. Kraakman (1999), "The Essential Role of Organizational Law" (April 29). Berkeley Program in Law & Economics, Working Paper Series. Paper 126. (Optional Reading) pdf
  • Hansmann H. (1988), "Ownership of the Firm," Journal of Law, Economics, and Organization, Fall , 267-304. (Optional Reading) pdf
  • Holmstrom, Bengt and John Roberts (1998), "The Boundaries of the Firm Revisited", in Symposium: The Firm and Its Boundaries, The Journal of Economic Perspectives, Vol. 12, No. 4. pp. 73-94. (Optional Reading) pdf

4.) Incentives vs. Transaction Costs

  • Grossman, Sanford J. and Oliver D. Hart (1986), "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration", The Journal of Political Economy, Vol. 94, No. 4. pp. 691-719. pdf
  • Levin Jonathan and Steve Tadelis, (xxxx) "Contracting for Government Services: Theory and Evidence from US Cities", mimeo. pdf
  • Holmstrom, Bengt (1999), "The firm as a subeconomy", J. Law Econ. Organ., 15: 74 - 102. pdf
  • Bajari, Patrick and Steven Tadelis (2001), "Incentives vs. Transaction Costs: A Theory of Procurement Contracts", RAND Journal of Economics, Vol. 32, No. 3, pp. 387-407. pdf
  • Whinston (2003), "On the Transaction Costs Determinants of Vertical Integration", The Journal of Law, Economics and Organization, Vol. 19, No. 1 pdf (Additional Reading Added Later)

5.) Empirical evidence

  • Masten, Scott E., James W. Meehan, Jr., Edward A. Snyder (1991), "The Costs of Organization", Journal of Law, Economics, & Organization, Vol. 7, No. 1. (Spring), pp. 1-25. pdf
  • Bajari, Patrick, Robert McMillan, and Steven Tadelis (2004), "Auctions versus Negotiations in Procurement: An Empirical Analysis", mimeo. pdf
  • Monteverde, Kirk and David J. Teece (1982), "Supplier Switching Costs and Vertical Integration in the Automobile Industry", The Bell Journal of Economics, Vol. 13, No. 1. pp. 206-213 pdf
  • Baker, George, and Thomas N. Hubbard (2003), "Make Vs. Buy in Trucking: Asset Ownership, Job Design, and Information", American Economic Review, pp. 551-572. pdf

6.) Empirical evidence (cont.)

  • Leffler, Keith B., Randal R. Rucker, Ian A. Munn (2000), "Transaction costs and the collection of information: presale measurement on private timber sales", Journal of Law, Economics, & Organization, (April), v16 i1, pp. 166-188. (Optional Reading) pdf
  • Leffler, Keith B., and Randal R. Rucker (1991) "Transaction Costs and the Efficient Organization of Production: A Study of Timber-Harvesting Contracts", Journal of Political Economy, 99(5), 1060-1087. (Optional Reading) pdf
  • Allen, Douglas W. and Dean Lueck (1993), "Transaction Costs and the Design of Cropshare Contracts The RAND Journal of Economics, Vol. 24, No. 1. pp. 78-100. (Optional Reading) pdf
  • Nickerson, Jackson, and Brian Silverman (2003), "Why Firms Want to Organize Efficiently and What Keeps Them from Doing So: Inappropriate Governance, Performance, and Adaptation in a Deregulated Industry", Administration Science Quarterly, vol 48, no.3, pp. 433-465. (Optional Reading) pdf
  • Hamilton, Barton and Jackson Nickerson (2003), "Correcting for Endogeneity in Strategic Management Research", Strategic Organization 1, 1, pp. 53-80. pdf
  • Nickerson, Jackson and Brian Silverman (2003), "Why Aren?t All Truck Drivers Owner-Operators? Asset Ownership and the Employment Relation in Interstate For-Hire Trucking", Journal of Economics, Management, and Strategy 91-118. (Optional Reading) pdf
  • Freeman, John, Jackson Nickerson and Brian Silverman (1997), "Profitability, Transactional Alignment, and Organizational Mortality in the U.S. Trucking Industry", Strategic Management Journal, 18, pp. 31-52. (Optional Reading) pdf

7.) Knowledge and the Structure of Organizations

  • Garicano, Luis and Thomas Hubbard (2007), "Managerial Leverage is Limited by the Extent of the Market: Hierarchies, Specialization, and the Utilization of Lawyers Human Capital", Journal of Law & Economics, pp:1-43. pdf
  • Antràs, Pol, Luis Garicano and Esteban Rossi-Hansberg (2004), "Outsourcing in a Knowledge Economy" (Optional Reading) pdf
  • Garicano, Luis and Tano Santos (2004), "Referrals", the American Economic Review, Vol. 94, No. 3, pp:499-525. (Optional Reading) pdf
  • Garicano, Luis (2000), "Hierarchies and the Organization of Knowledge in Production", The Journal of Political Economy, Vol. 108, No. 5. (Oct.), pp. 874-904. pdf

8.) Contracts and Marketing

  • Rindfleisch, Aric, and Jan B. Heide (1997), "Transaction Cost Analysis: Past, Present, and Future Applications," Journal of Marketing, 61 (October), pp. 30-54. pdf
  • Lafontaine, Francine and Kathryn L. Shaw (1999), "The Dynamics of Franchise Contracting: Evidence from Panel Data", The Journal of Political Economy, Vol. 107, No. 5. (Oct.), pp. 1041-1080. (Optional Reading) pdf
  • Bhattacharyya, Sugato and Francine Lafontaine (1995), "Double-Sided Moral Hazard and the Nature of Share Contracts", in Part II: Agency Relationships, The RAND Journal of Economics, Vol. 26, No. 4, Symposium on the Economics of Organization. pp. 761-781. (Optional Reading) pdf
  • Lafontaine, Francine (1993), "Contractual Arrangements as Signaling Devices: Evidence from Franchising", Journal of Law, Economics, & Organization, Vol. 9, No. 2. (Oct.), pp. 256-289. (Optional Reading) pdf
  • Lafontaine, Francine (1992), "Agency Theory and Franchising: Some Empirical Results", The RAND Journal of Economics, Vol. 23, No. 2. (Summer), pp. 263-283. pdf

9.) Labor Contracts and Compensation

  • Holmstrom, Bengt and Paul Milgrom (1991), "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design", Journal of Law, Economics, & Organization, Vol. 7, Special Issue: Papers from the Conference on the New Science of Organization, January, pp. 24-52. pdf
  • Bertrand, Marianne and Sendhil Mullainathan (2000), "Agents with and without Principals", The American Economic Review, Vol. 90, No. 2, Papers and Proceedings of the One Hundred Twelfth Annual Meeting of the American Economic Association. (May), pp. 203-208. pdf
  • Bertrand, Marianne, and Sendhil Mullainathan (2001), "Are CEOs Rewarded for Luck: The Ones Without Principals Are", The Quarterly Journal of Economics, 116, 3, pp. 901-932. (Optional Reading) pdf
  • Anderson, Erin (1988), "Strategic Implications of Darwinian Economics for Selling Efficiency and Choice of Integrated or Independent Sales Forces," Management Science, 34 (May), 599-618. pdf
  • Anderson, Erin and David C. Schmittlein (1984), "Integration of the Sales Force: An Empirical Examination", The RAND Journal of Economics, Vol. 15, No. 3. (Autumn), pp. 385-395. pdf
  • Ichniowski, Casey, Kathryn Shaw, Giovanna Prennushi (1997), "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines", The American Economic Review, Vol. 87, No. 3. (Jun.), pp. 291-313. pdf

10.) Influence within Organizations

  • Milgrom P. and J. Roberts (xxxx), "Bargaining Costs, Influence Costs, and the Organization of Economic Activity", in J. Alt and K. Shepsle, eds., Perspectives on Positive Political Economy. New York: Cambridge University Press, 90-143. (Optional Reading)
  • Prendergast C. and R.H. Topel (1996), "Favoritism in Organizations", Journal of Political Economy, 104, pp. 958-978 pdf
  • Holmstrom, B (1999), "The Firm as a Subeconomy", Journal of Law, Economics, and Organization, 15, pp. 74-102. (Optional Reading) pdf
  • Baker, G, R Gibbons, and K.J. Murphy (1999), "Informal Authority in Organizations", Journal of Law, Economics & Organization, 15, March pp. 56-73. pdf
  • Holmstrom, Bengt and Paul Milgrom (1991), "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design", Journal of Law, Economics, & Organization, Vol. 7, Special Issue: Papers from the Conference on the New Science of Organization, January, pp. 24-52. pdf
  • Gibbons, R. (1998), "Incentives in Organizations.", Journal of Economic Perspectives, 12, pp. 115-32 (especially pp. 115-23). pdf
  • Baker. G. (1992), "Incentive Contracts and Performance Measurement", Journal of Political Economy, 100, pp. 598-614. (Optional Reading) pdf
  • Gibbons R. and M. Waldman (1999), "Careers in Organizations: Theory and Evidence.", Ch. 36 in Volume 3B of O. Ashenfelter and D. Card (eds.), Handbook of Labor Economics, North Holland. (Optional Reading)
  • Prendergast. C. (1999), "The Provision of Incentives in Firms.", Journal of Economic Literature, 37, 7-63 pdf
  • Pfeffer. J. (1990), "Incentives in Organizations: The Importance of Social Relations.", In O.E. Williamson (ed.), Organization Theory: From Chester Barnard to the Present and Beyond. New York: Oxford University Press.
  • Demsetz. H. (1995), "Enterprise Control, Wealth, and Economic Development", chapter 3 in The Economics of the Business Firm, pp. 40-60. (Optional Reading)
  • Shelanski, H.A. (2004), "Transaction-level Determinants of Transfer-Pricing Policy: Evidence from the High-Technology Sector, Industrial and Corporate Change, 13, pp. 953-966. (Optional Reading) pdf
  • Dal Bó, Ernesto, Pedro Dal Bó, and Rafael di Tella (2006), "Plata o Plomo? Bribe and Punishment in a Theory of Political Influence", American Political Science Review, Vol 100, No. 1 Feb., pp. 41-53. pdf

11.) Bureaucracy

  • Spiller, Pablo (1990), "Politicians, Interest Groups, and Regulators: A Multiple-Principals Agency Theory of Regulation, or Let Them Be Bribed", Journal of Law and Economics, Vol. 33, No. 1. (Apr.), pp. 65-101. pdf
  • Williamson, Oliver E. (1999), "Public and Private Bureaucracies: A Transaction Costs Economics Perspective", Journal of Law, Economics and Organization, Vol 15, March pp. 306-342. pdf
  • Prendergast, Canice (2003), "The Limits of Bureaucratic Efficiency", Journal of Political Economy. pdf
  • Dixit, Avinash (2002), "Incentives and Organizations in the Public Sector: An Interpretative Review", The Journal of Human Resources, Vol. 37, No. 4 (Autumn), pp. 696-727. (Optional Reading) pdf
  • McCubbins, Mathew D. and Thomas Schwartz (1984), "Congressional Oversight Overlooked: Police Patrols versus Fire Alarms", American Journal of Political Science, Vol. 28, No. 1 (Feb.), pp. 165-179. pdf

12.) Regulation and Privatization

  • Demsetz, Harold (1968), "Why Regulate Utilities", Journal of Law and Economics, 11, April, pp. 55-56. pdf
  • Goldberg (1976), "Regulation and Administered Contracts", Bell Journal of Economics, Spring, pp. 426-448. pdf
  • Williamson, Oliver E. (1976), "Franchise Bidding for Natural Monopolies-in General and with Respect to CATV", The Bell Journal of Economics, Vol. 7, No. 1 (Spring), pp. 73-104. pdf
  • Levy, Brian and Pablo Spiller (1994), "The Institutional Foundations of Regulatory Commitment: A Comparative Analysis of Telecommunications Regulation", The Journal of Law, Economics and Organization, October, pp. 201-246. pdf
  • Troesken, W. (1997), "The sources of public ownership: Historical evidence from the gas industry", Journal of Law Economics & Organization, April, Vol. 13, pp. 1-25. (Optional Reading) pdf

13.) Political Institutions

  • Weingast and Marshall (1988), "The Industrial Organization of Congress",Journal of Political Economy, vol. 96, pp. 132-163. pdf
  • Spiller, Pablo T. and Rafael Gely (1992), "Congressional Control or Judicial Independence: The Determinants of U.S. Supreme Court Labor-Relations Decisions, 1949-1988", The RAND Journal of Economics, Vol. 23, No. 4 (Winter), pp. 463-492. pdf
  • McCubbins, Matt, Roger Noll and Barry Weingast (1987), "Administrative Procedures as Instruments of Control", JLEO, pp. 243-277. pdf
  • De Figueiredo, Rui, Pablo T. Spiller, and Santiago Urbiztondo (1999), "An informational perspective on administrative procedures", Journal of Law Economics and Organization, March, pp. 283-305. pdf

14.) Unspecified

  • Williamson, Oliver E. (1993), "Calculativeness, Trust, and Economic Organization", Journal of Law and Economics, Vol. 36, No. 1, Part 2, John M. Olin Centennial Conference in Law and Economics at the University of Chicago, (Apr.), pp. 453-486.
  • Greif, Avner (1993), "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition", American Economic Review, 83 (3), 525-548. pdf

Note that, aside from these two papers, class 14 was left unspecified. A number of papers may have been set in class.

Seminal but not included:

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