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Industrial Organization

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Materials, Structural Change, and Spatial Scales

The use of economic modeling techniques in industrial ecology research provides distinct advantages over the customary approach, which focuses on the physical description of material flows. The thirteen chapters of Economics of Industrial Ecology integrate the natural science and technological dimensions of industrial ecology with a rigorous economic approach and by doing so contribute to the advancement of this emerging field. Using a variety of modeling techniques (including econometric, partial and general equilibrium, and input-output models) and applying them to a wide range of materials, economic sectors, and countries, these studies analyze the driving forces behind material flows and structural changes in order to offer guidance for economically and socially feasible policy solutions.

After a survey of concepts and relevant research that provides a useful background for the chapters that follow, the book presents historical analyses of structural change from statistical and decomposition approaches; a range of models that predict structural change on the national and regional scale under different policy scenarios; two models that can be used to analyze waste management and recycling operations; and, adopting the perspective of local scale, an analysis of the dynamics of eco-industrial parks in Denmark and the Netherlands. The book concludes with a discussion of the policy implications of an economic approach to industrial ecology.

Despite the vast research literature on topics relating to contract theory, only a few of the field's core ideas are covered in microeconomics textbooks. This long-awaited book fills the need for a comprehensive textbook on contract theory suitable for use at the graduate and advanced undergraduate levels. It covers the areas of agency theory, information economics, and organization theory, highlighting common themes and methodologies and presenting the main ideas in an accessible way. It also presents many applications in all areas of economics, especially labor economics, industrial organization, and corporate finance. The book emphasizes applications rather than general theorems while providing self-contained, intuitive treatment of the simple models analyzed. In this way, it can also serve as a reference for researchers interested in building contract-theoretic models in applied contexts.The book covers all the major topics in contract theory taught in most graduate courses. It begins by discussing such basic ideas in incentive and information theory as screening, signaling, and moral hazard. Subsequent sections treat multilateral contracting with private information or hidden actions, covering auction theory, bilateral trade under private information, and the theory of the internal organization of firms; long-term contracts with private information or hidden actions; and incomplete contracts, the theory of ownership and control, and contracting with externalities. Each chapter ends with a guide to the relevant literature. Exercises appear in a separate chapter at the end of the book.

Downloadable instructor resources available for this title: solutions to all exercises in the book

Problems and Potential

This timely report appears during a period when rising food prices are a subject of public concern and the entire food distribution system is encountering difficulty in handling upward pressures on operating costs. At this juncture, there is a need for a critical examination of inefficient and outdated procedures and operations within America's food distribution system. For this reason, this volume has been produced as rapidly as possible for wide distribution to the food industry—the nation's largest business—and for the immediate or ultimate benefit of all those who consume its product.

The book is the first to treat the industry as a systematic whole—or, more exactly, to identify the ways in which it can be made into such a whole, with better couplings at the junctures between manufacturing/processing/transporting/warehousing/retailing. This will require both the application of technological breakthroughs and the breaking down of institutional barriers.

In addition to better vertical integration of these various levels, the author advocates greater horizontal cooperation among the companies at a given level. He itemizes ways in which productivity can be increased through the standardization of equipment and procedures on an industry-wide basis—without leading to a restraint of trade or subjecting individual companies to the threat of antitrust prosecution.

Speaking before a panel of the National Industrial Conference Board, Dr. Bloom stated that the opportunities for improving productivity now lie in "the interfirm locus rather than the intrafirm area which until now has been the main sphere of productivity emphasis... [Managers] have ignored the effect of their action upon other units within the industry system. The result is an appalling degree of waste within the system as a whole."

Specific proposals and broad recommendations are advanced involving both legislation and industrial action to accelerate the rate of productivity improvement with an emphasis upon the systems approach to productivity problems. The report also draws some general implications for productivity improvement in other industries and in the entire American economy. These implications are drawn in part from realistic extensions of the findings in the food industry and in part from more general considerations.

Nontechnical yet analytically rigorous, The Multinational Paradigm represents a new direction in understanding the multinational corporation. Aliber suggests that changes in the relative rates of economic growth of countries lead to changes in exchange rates that have an important impact on the financing, sourcing, and marketing decisions and practices of individual firms. He provides a unique perspective for examining what is different about business in a global context by placing these decisions in the framework of the multinational paradigm—the choice between whether the firm should centralize or decentralize its production, marketing, and finance and the factors involved in this trade-off. Aliber's theory is the first to adequately explain why the flow of direct foreign investment shifted in the 1980s toward the US as a host country.

In a framework that Aliber calls "the Andy Warhol view of countries in the world economy," he proposes that every country has a short time span (15, 20, or perhaps even 30 years) during which it grows rapidly; thus individual countries experience growth at different times. He argues that during this growth period real interest rates and profit rates are high, capital flows to the country, and its currency appreciates. New firms are formed at an increasingly rapid rate, and the average age of both the labor force and the industrial plant and equipment of the typical firm decreases. When the growth rate within a country slows, these conditions are reversed.

In separate chapters, Aliber discusses the implications of changes in growth rates of individual countries for strategic management and for financing decisions (currency denomination of a firm's debt, cash management practices, capital budgeting). He applies the multinational paradigm to decisions about location of plants and to the trade-offs between global and national marketing. Changes in the pattern of direct foreign investment are analyzed and conflicts between host governments and multinational corporations are evaluated in terms of the paradigm.

The Textile and Pulp and Paper Industries

A developing country's choice of an appropriate technology from among those available for use in a particular industry is critical: alternative technological strategies that involve varying mixes of capital, labor, and social costs could have significantly different impacts not only on the industry but also on the country itself, especially one whose industrial base is restricted. This book presents one of the first empirical studies in this area.

Recent choices of manufacturing equipment procured by a sample of firms in Colombia, Brazil, the Philippines, and Indonesia are the focus of the study, although a few plants in the US and Japan are also included for comparative purposes. These firms are engaged in the spinning and weaving of short fibers (cotton and synthetics) or in the sulfate pulping of wood and paper making. Since both Latin American and Asian experiences are reviewed and both a mechanical and a chemical process industry are treated, the findings are relevant to other countries and other industries.

Amsalem's methodology for evaluating alternative technologies goes beyond the consideration of two factors of production (capital-labor ratios). It enables him to factor in differences in labor skills and productivity, the varying efficiencies of machine utilization, levels of energy intensity appropriate to an industry, plant requirements, and market and social costs. The book also examines the effects of government policies and incentives on the decision processes that culminate in a choice among competing technologies.

The Economics and Politics of Private Pensions

Why are pension funds so large and benefits so small? This examination of the 120-year-old American system of privatized social insurance—often called, at 1.7 trillion dollars, the biggest lump of money in the world—reveals that the system fails to provide adequate retirement income security, its most prominent goal, and, in fact, its greatest influence is in supplying funds to U.S. capital markets.

Linking market forces, historical movements, and social norms in the evolution of pensions, Ghilarducci's study is the first to focus on all major aspects of the system. Its trenchant analysis of the many sides of pensions and pension policy addresses questions of whom the system benefits, its direct and social costs, and the possibilities of reforms that would take into account the related problems of capital formation and retirement income.

Ghilarducci describes the history of pension funds and the involvement of unions in bargaining. She takes up the "moral hazard" involved in the conflicting interests of corporations and their employees, tackling issues of information availability and inequality of pension distribution based on sex, race, and job hierarchy. And in two chapters, each focusing on corporate and union uses of pension funds, she covers such topics as tax breaks, the effect of corporate takeovers, the use of pensions to pay back debt, and the kinds of skimming that can occur despite government regulation of pension activities. Ghilarducci concludes by presenting an ideal pension plan that would benefit both employer and employee and by offering predictions about pension plans of the future. Teresa Ghilarducci is Associate Professor of Economics at the University of Notre Dame.

Technological advances and changes in the global economy are increasing the geographic distribution of work in industries as diverse as banking, wine production, and clothing design. Many workers communicate regularly with distant coworkers; some monitor and manipulate tools and objects at a distance. Work teams are spread across different cities or countries. Joint ventures and multiorganizational projects entail work in many locations. Two famous examples--the Hudson Bay Company’s seventeenth-century fur trading empire and the electronic community that created the original Linux computer operating system--suggest that distributed work arrangements can be flexible, innovative, and highly successful. At the same time, distributed work complicates workers’ professional and personal lives. Distributed work alters how people communicate and how they organize themselves and their work, and it changes the nature of employee-employer relationships.This book takes a multidisciplinary approach to the study of distributed work groups and organizations, the challenges inherent in distributed work, and ways to make distributed work more effective. Specific topics include division of labor, incentives, managing group members, facilitating interaction among distant workers, and monitoring performance. The final chapters focus on distributed work in one domain, collaborative scientific research. The contributors include psychologists, cognitive scientists, sociologists, anthropologists, historians, economists, and computer scientists.

Cartel Policy and the Evolution of Strategy and Structure in British Industry

Policies to promote competition are high on the political agenda worldwide. But in a constantly changing marketplace, the effects of more intense competition on firm conduct, market structure, and industry performance are often hard to distinguish. This study combines game-theoretic models with empirical evidence from a "natural experiment" of policy reform. The introduction in the United Kingdom of the 1956 Restrictive Trade Practices Act led to the registration and subsequent abolition of explicit restrictive agreements between firms and the intensification of price competition across a range of manufacturing industries. An equally large number of industries were not affected by the legislation.

Using data from before and after the 1956 act, this book compares the two groups of industries to determine the effect of price competition on concentration, firm and plant numbers, profitability, advertising intensity, and innovation. The book avoids two problems common to empirical studies of competition: how to measure the intensity of competition and how to unravel the links between competition and other variables. Because the change in the intensity of competition had an external cause, there is no need to measure the intensity of competition directly, and it is possible to identify one-way causal effects when estimating the impact of competition.

The book also examines issues such as the industries in which collusion is more likely to occur; the effect of cartels and cartel laws on market structure and profitability; the links between competition, advertising, and innovation; and the constraints on the exercise of merger and antitrust policies.

Computational Modeling and Organizational Theories

An organization is more than the sum of its parts, and the individual components that function as a complex social system can be understood only by analyzing their collective behavior. This book shows how state-of-the-art simulation methods, including genetic algorithms, neural networks, and cellular automata, can be brought to bear on central problems of organizational theory related to the emergence, permanence, and dissolution of hierarchical macrostructures. The emphasis is on the application of a new generation of equation- and agent-based computational models that can help students of organizations to reformulate their basic research questions starting from assumptions about how to link—rather than separate—different levels of organizational analysis.

Cities, Regions, and International Trade

Since 1990 there has been a renaissance of theoretical and empirical work on the spatial aspects of the economy--that is, where economic activity occurs and why. Using new tools--in particular, modeling techniques developed to analyze industrial organization, international trade, and economic growth--this "new economic geography" has emerged as one of the most exciting areas of contemporary economics.The authors show how seemingly disparate models reflect a few basic themes, and in so doing they develop a common "grammar" for discussing a variety of issues. They show how a common approach that emphasizes the three-way interaction among increasing returns, transportation costs, and the movement of productive factors can be applied to a wide range of issues in urban, regional, and international economics. This book is the first to provide a sound and unified explanation of the existence of large economic agglomerations at various spatial scales.

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