Materials for the course Organizations and Markets.

Course organization

Outline. Syllabus. Grading. Team project instructions. Ideas for Projects. Exercises. Guidelines for writing homework

1. Behavior

Basic materials:

• Power Point presentation on "Human Nature and Institutions"
• Power Point presentation on "Altruism and Rationality"
• Arruñada, B., "Human Nature and Institutions," in J.-M. Glachant and E. Brousseau, eds., New Institutional Economics, Cambridge University Press, Cambridge, 2008, 81-99.
• Cosmides, L., and J. Tooby, "Evolutionary Psychology: A Primer", CEP, University of California, Santa Barbara,1997.
• Frank, R. H., Microeconomics and Behavior, 5th ed., McGraw-Hill, New York, 2003, chapters 7 & 8
• An example to discuss: The Milgram experiment: 61-66% of participants are prepared to inflict fatal voltages.

Additional materials:

• Managerial applications: Nicholson, Nigel, "How Hardwired Is Human Behavior?," Harvard Business Review, July, 1998, 135-47.
• An interesting case on the role of culture: "The Ethnic Theory of Plane Crashes," Ch. 6 in Malcolm Gladwell, Outliers: The Story of Success, Allen Lane, London, 2008, pp. 177-223.
• Doubts on the speed of human evolution: Hawks et al., "Recent Acceleration of Human Adaptive Evolution," PNAS, December 26, 2007, 20753-58.
• A survey of the field: Carr, Geoffrey, “The Proper Study of Mankind”, The Economist, December 20, 2005. Interview with the author (12 minutes).
• A few clips from The Economist: "Bayes Rules" (January 7, 2006, pp. 70-71); "Mind Games: Can Studying the Human Brain Revolutionise Economics?" (January 15th., 2005, 68); "Games People Play" (January 20th., 2005, 73-74).
• Papers on neuroeconomics presented at the 2005 AEA meetings.

Applications:

• Managing inherited wealth: Laroque, J., “A Guide to Giving,” Intelligent Life, 2007, Autumn, 72-79.
• The cognition of judges: Arruñada, B., and V. Andonova, “Judges’ Cognition and Market Order,” Review of Law and Economics, 4(2), 2008, 665-92.
• Organized moral enforcement: Arruñada, B., “Specialization and Rent-Seeking in Moral Enforcement: The Case of Confession,” Journal for the Scientific Study of Religion, 48(3), 2003, 443-61.
• The Market for News & the WHO Flu Crisis: Slides (2010).

2. Incentives

Basic materials:

• Slides: Compensation & Incentives, Agency, Psycology of Incentives
• BSZ, Chs. 14, 15 & 16
• Fehr, E., and A. Falk, “Psychological Foundations of Incentives,” European Economic Review, 46(4-5), 2002, 687-724.
• Cowen, T., “How to Control the World: The Basics,” Chapter 2 in Discover Your Inner Economist, Penguin, New York, 2007, 11-29.
• Kerr, S., “On the Folly of Rewarding A, while Hoping for B”, Academy of Management Executive, 9(1), 1975, 7-14.

Additional materials:

• Gibbons, R., "Incentives in Organizations," Journal of Economics Perspectives, 12(4), 1998, 115-132.

3. Organizational Structure and Divisionalization

Basic materials:

• PDF slides on Organizational Structure, Team Production and Divisionalization.
• Application: Competition in Bureacracy
• BSZ, Ch. 17

Additional materials:

• Arruñada, B., and M. González, “How Competition Controls Team Production: The Case of Fishing Firms,” Universitat Pompeu Fabra, Economics and Business Working Paper Series 261, November, 2002.
• Arruñada, B., “Price Regulation of Plastic Money: A Critical Assessment of Spanish Rules,” European Business Organization Law Review, 6(4), 2005, 625-50.
• Arruñada, B., L. Vázquez and G. Zanarone, “Institutional Constraints on Organizations: The Case of Spanish Car Dealerships,” Managerial and Decision Economics, 30(1), 2009, 15-26

4. Specialization and Exchange: Markets and Politics

Basic materials:

• Powerpoint presentation. More slides
• BSZ (Brickely, J.A., C.W. Smith Jr., and J.L. Zimmerman, 2007, Managerial Economics and Organizational Architecture, 4th. ed., McGraw-Hill, Boston), Ch. 3.

Additional materials:

• Hayek, F. A., “The Use of Knowledge in Society,” The American Economic Review, 35(4), 1945, 519-30.
• Coase, R. H., “The Nature of the Firm,” Economica, 4(16), 1937, 386-405.
• Coase, R. H., “The Problem of Social Cost,” Journal of Law and Economics, 3(October), 1960,1-44.

Applications on property- and business-supporting institutions:

• Arruñada, B., and N. Garoupa, “The Choice of Titling System in Land,” Journal of Law and Economics, 48(2), 2005, 709-27.
• Arruñada, B., “Property Enforcement as Organized Consent,” Journal of Law, Economics, and Organization, 19(2), 2003, 401-44.
• Arruñada, B., “Institutional Support of the Firm: A Theory of Business Registries,” Journal of Legal Analysis, 2(2), 2010, 525-76.

5. The Institutional Support of Business Activity

Basic materials:

• Slides
• BSZ, Ch. 10
• Arruñada, B., “The Role of Institutions in the Contractual Process”, in B. Deffains and T. Kirat, eds., Law and Economics in Civil Law Countries, The Economics of Legal Relationships Series, vol. 6, Elsevier Science, Amsterdam, 2001, 149-167.

Additional materials and cases to be discussed in class:

• An attempt to measure the performance of institutions: World Bank's Doing Business Report. For a critique of Doing Business: Arruñada, B., “Pitfalls to Avoid when Measuring the Institutional Environment: Is ‘Doing Business’ Damaging Business,” Journal of Comparative Economics, 35(4), 2007, 729-47. Doing Business' Response. Blog discussion.
• On third-party enforcement: Arruñada, B., and V. Andonova, “Market Institutions and Judicial Rulemaking,” in C. Ménard and M. M. Shirley, eds., Handbook of New Institutional Economics, Dordrecht, Springer, 2005, 229-250.
• On second-party enforcement (private legal orders and their interaction with public legal orders):
• Arruñada, B., “The Quasi-Judicial Role of Large Retailers: An Efficiency Hypothesis of their Relation with Suppliers,” Revue d’Economie Industrielle, no. 92, 2nd and 3rd trimesters, 2000, 277-296.
• Arruñada, B., L. Garicano and L. Vázquez, “Contractual Allocation of Decision Rights and Incentives: The Case of Automobile Distribution,” Journal of Law, Economics, and Organization, 17(1), Spring 2001, 256-283.
• Arruñada, B., L. Garicano, and L. Vázquez, “Completing Contracts Ex Post: How Car Manufacturers Manage Car Dealers”, Review of Law and Economics, 1(1), 2005, 149-173.
• On first-party enforcement: Arruñada, B., “Protestants and Catholics: Similar Work Ethic, Different Social Ethic,” The Economic Journal, 120 (547), 2010, 890-918.
• Some interesting examples: Illy, Nespresso, Carmax.

6. Vertical integration (optional)

Basic materials:

• Slides
• C&P (Carlton, D. W., and J. W. Perloff, Modern Industrial Organization, 3rd. ed., Addison-Wesley, Reading, MA, 2000), Ch. 12.

Additional materials:

• Arruñada, B. and X. H. Vázquez, “When Your Contract Manufacturer Becomes Your Competitor,” Harvard Business Review, 84(9), 2006, 135–145.
• Arruñada, B., M. González-Díaz, and A. Fernández, “Determinants of Organizational Form: Transaction Costs and Institutions in the European Trucking Industry,” Industrial and Corporate Change, 13(6), 2004, 867-882.
• González, M., B. Arruñada and A. Fernández, “Causes of Subcontracting: Evidence from Panel Data on Construction Firms,” Journal of Economic Behavior and Organization, 42(2), April 2000, 167-87.

7. Contracting Capital (optional)

Basic materials:

• Slides
• Posner, R.A., Economic Analysis of Law, 5th ed., Aspen, New York, 1998,Ch. 14.

Additional materials:

• An interesting analysis of the links between the theory of the firm and corporate finance: Zingales, L., “In Search of New Foundations,”The Journal of Finance, 55(4), Papers and Proceedings, 1623-1653.
• The role of financial auditing: Arruñada, B., “Audit Quality: Attributes, Private Safeguards and the Role of Regulation,” The European Accounting Review, 9(2), 2000, 205-224.

8. Quality Assurance (optional)

Basic materials:

• Slides
• C&P, Chs. 13 & 14
• Case: The Endesa's Ombudsman

Additional materials:

• Arruñada, B., “Quality Safeguards and Regulation of Online Pharmacies,” Health Economics, 13(4), 2004, 329-344.
• Arruñada, B., “Managing Competition in Professional Services and the Burden of Inertia,” in Claus-Dieter Ehlermann and Isabela Atanasiu, eds., European Competition Law Annual 2004: The Relationship between Competition Law and the (Liberal) Professions, Hart Publishing, Oxford and Portland Oregon, 2006, 51-71.

9. Firms and Society (optional)

Basic materials:

• Introductory discussion: Slides (section 4).
• Capstone discussion on CSR (Slides): Corporate Social Responsibility.
• Friedman, M. “The Social Responsibility of Business is to Increase its Profits,” New York Times Magazine, September 13,1970.
• Arrow, J.K., “Social Responsibility and Economic Efficiency,” Public Policy, 21(Summer), 1973.
• Crook, C., “The Good Company” (Survey on “Corporate Social Responsibility”), The Economist, January 20, 2005.
• Franklin, D., “Just Good Business,”The Economist, January 17, 2008.

Recommended final readings

• Hayek, F. A., “The Pretence of Knowledge,” The American Economic Review, 79(6), 1989, 3-7.
• Somerset Maugham,W.,“The Verger,” (off-site).