Organizational Economics

Universidad Carlos III de Madrid

Course Description

  • Course Name

    Organizational Economics

  • Host University

    Universidad Carlos III de Madrid

  • Location

    Madrid, Spain

  • Area of Study

    Business Administration, Economics, Management, Mathematics, Statistics

  • Language Level

    Taught In English

  • Prerequisites

    Mathematics for Economists (or similar)

  • Course Level Recommendations


    ISA offers course level recommendations in an effort to facilitate the determination of course levels by credential evaluators.We advice each institution to have their own credentials evaluator make the final decision regrading course levels.

    Hours & Credits

  • ECTS Credits

  • Recommended U.S. Semester Credits
  • Recommended U.S. Quarter Units
  • Overview

    - Acquisition of a working understanding of the economic approach to the study of organizations.
    - Ability to apply that approach to the analysis of specific problems arising in firms and other organizations.
    - Ability to work in groups to analyze in depth organizational problems faced by actual firms and to present the results of the analysis to an audience with the help of au
    - Ability to analyze rigorously and discuss in public practical problems of business organization.
    - Understand the concept of informational asymmetry and its implications for organization.
    - Understand the key concepts of the economic analysis of employee selection and the provision of incentives in firms and be able to apply these concepts to address organizational problems faced by today's firms.
    - Understand the concepts of horizontal and vertical integration and their determinants and be able to apply this understanding to the study of firms¿ decisions regarding their scale, scope and location in the value chain.


    1. Internal Organization: Selection and Incentives
    1.1. Selection: asymmetric information, adverse selection, signaling, and screening
    1.2. Explicit incentives
    1.2.1. The Principal-Agent model
    1.2.2. Optimal compensation contracts and the trade-off between incentives and insurance
    1.2.3. Multi-tasking and optimal compensation
    1.2.4. The choice of performance measures
    1.3. Implicit incentives and organization
    1.3.1. Incentives in teams
    1.3.2. Implicit incentives

    2. Firm Boundaries
    2.1. Horizontal boundaries
    2.1.1. Scale and scope economies
    2.1.2. Diseconomies of scale
    2.1.3. The learning curve
    2.1.4. Network externalities
    2.1.5. Diversification
    2.2. Vertical boundaries
    2.2.1. The "make or buy" decision
    2.2.2. Transaction costs and vertical integration
    2.2.3. Specific investments, hold up and vertical integration
    2.2.4. Hybrid forms

    Textbook and article readings, case studies, and news articles, will be used throughout the course to present, develop, and apply the key concepts of the economic analysis of organizations. The teacher will announce in advance the materials that will be used in each session and students will work on those materials prior to the lecture. Students will also be expected to participate actively in the class discussion of case studies and the solution of exercises. Students will (1) turn in written exercises solved individually, (2) participate in class discussions of case studies and selected readings, participation that will require preparation previous to the session, and (3) form groups to analyze in depth a case study on a topic approved by the teacher and to present the analysis in front of the class.

    The final grade will consist of the following components: (1) Written final exam -50%-; (2) team case study: written assignment and class presentation -20%-; (3) written review tests -20%-; (4) active participation in the class discussion of case studies and exercises -10%-.% end-of-term-examination: 50 % of continuous assessment (assigments, laboratory, practicals?): 50

    - Milgrom, P. and J. Roberts Economics, Organization and Management, Prentice Hall, 1992
    - Besanko, D., D. Dranove, M. Shanley y S. Schaefer Economics of Strategy. Fifth Edition., John Wiley & Sons, Inc, 2010

    - Besanko, D., D. Dranove, M. Shanley, and S. Schaefer Economics of Strategy. Third Edition. , John Wiley &
    Sons, Inc., 2003
    - Lazear E. P, and M. Gibbs Personnel Economics in Practice, 2nd. edition, John Wiley & Sons, Inc., 2009

Course Disclaimer

Please note that there are no beginning level Spanish courses offered in this program.

Courses and course hours of instruction are subject to change.

Eligibility for courses may be subject to a placement exam and/or pre-requisites.

Credits earned vary according to the policies of the students' home institutions. According to ISA policy and possible visa requirements, students must maintain full-time enrollment status, as determined by their home institutions, for the duration of the program.

ECTS (European Credit Transfer and Accumulation System) credits are converted to semester credits/quarter units differently among U.S. universities. Students should confirm the conversion scale used at their home university when determining credit transfer.

Please reference fall and spring course lists as not all courses are taught during both semesters.

Availability of courses is based on enrollment numbers. All students should seek pre-approval for alternate courses in the event of last minute class cancellations

Please note that some courses with locals have recommended prerequisite courses. It is the student's responsibility to consult any recommended prerequisites prior to enrolling in their course.


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