Faculty
Nicolai Foss, Stefan Linder

Course Coordinator
Nicolai Foss

Course status
This is a course on organizational economics that complements or even provide the foundation for many discussions and insights applied in strategic management, corporate finance, and corporate governance.

The course provides an introduction to the modern microeconomics of firm organization.. It surveys central concepts such as asymmetric information, efficiency, incentive conflicts, property rights,
specific assets, etc., and show how these in a game theoretic setting constitute the building blocks of an economic approach to organizations. The course surveys principal-agent theory, transaction cost economics and property rights theory, and develops business applications of these theories. As
such the course provides students with a fundamental toolbox to analyze issues of fundamental importance to business strategy (how should the firm compete in a given market?), corporate strategy (which markets should the firm compete in?), and, in particular, organizational
strategy (how should the organization be designed to serve strategic ends?). Among the issues that are analyzed are the make or buy decision, internal organization, low and high powered performance incentives, optimal patterns of ownership, and hybrid arrangements (such as
franchising).

Fundamental game theoretic notions (strategies, normal and extensive form games, Nash equilibrium, subgame perfection), the meaning of efficiency, the Coase theorem, general equilibrium, problems of delegation: principal-agent theory, transaction cost economics, self-enforcing contracts, ownership, bounded rationality and organizational decision-making.

Lectures

Two (graded) essays: 1 in the middle of the class and 1 in the end of the class (maximum 6 A4 pages). The topic is given by faculty. The exam is graded by faculty.