Department
of Economics
ECO
370Y
The
Economics of Organizations
Fall
2006 – Winter 2007
Class meetings: Fridays 10 – 12, Room CC 2150
Contact information:
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Semester: |
Fall 2006 |
Winter 2007 |
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Instructor: |
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Office: |
K114A |
K262 |
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Phone: |
(905) 569-4904 |
(905) 828-3901 |
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E-mail: |
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Office hours: |
Fridays |
Fridays |
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Course website: |
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Course description:
This course introduces students to the economic analysis of
organizations. The course consists of two parts. In the first part, we explore a
variety of internal organizational issues related to employee coordination and motivation; incentives and compensation; formal and
informal relationships within organizations; decision making and authority
in organizations; and organizational design and structure. In the second part,
we study the boundaries of the firm. Different theories of the firm will be
introduced and we will discuss evidence supporting or opposing each theory. We
will focus on the following two questions: Which components should be produced
in-house and which outsourced? How should innovation be organized?
Course prerequisites:
This course requires a good understanding of microeconomic theory and
mathematics, at the level of second-year microeconomics and quantitative economics.
The course enrollment is limited only
to those students who have completed the following prerequisite courses or
their alternatives: ECO200Y5/206Y5, 220Y5/227Y5/(STA250H1, 257H5)/(STA257H5,
261H5)/(STA257H5, 248H5/258H5). Please note that you will be removed from this
course if you do not meet all academic enrollment requirements imposed by the
Department of Economics on Eco 370 students. Those students who have already
completed or are planning to take ECO381H5, 426H1, or
MGT310Y1 should not enroll in this course.
Course readings:
There are no assigned textbooks for this course. However, the students
are expected to complete a number of assigned readings, which can be downloaded
either through the course website or through the U of T E-journal library
system. In addition, brief lecture notes/slides will be posted on the course
website. In order to successfully complete course midterms and the final exam,
you should read the assigned articles/materials from the course reading list
and should regularly attend course lectures.
Course evaluation:
Your grade in this course will be based on your performance in two
equally weighted midterm tests (the total weight is 60% of the course mark) and
a final examination (the remaining 40% of the course mark):
Midterm Test 1 (30%): November 10,
Midterm Test 2 (30%): February 2,
Final exam (40%): Final exam period, time and
location TBA
The tests will consist of short-answer and short-essay questions, as
well as numerical problems. Material is not
cumulative across tests.
If a student misses a term test and fails to provide a valid medical
certificate or a note from the Registrar’s Office justifying his/her absence on
a test date, a zero credit will be applied towards the relevant test mark. If a
student is absent and provides a note within
one week after the test date or gets an instructor’s approval for his/her
test-date absence before a test,
then he/she has to write a make-up test in February, with the exact date, time,
and location to be announced later in class. The make-up test will be
cumulatively based on the material covered by both midterm tests. For a student
who misses one midterm, the makeup test’s weight will be 30% of his/her course
mark. For a student who misses (for valid reasons) both midterms, the makeup test’s weight will be 40% of his/her
course mark, while the final exam’s weight will be increased to 60%.
Before each test, a list of practice questions/problems will be posted
on the course website, so that the students can get an idea on what types of
questions to expect during a test. The formal answers to these
problems/questions will not be provided, but you will have an opportunity to
get some pointers during office hours. You are strongly encouraged to work on
these questions – either individually or in groups – because the tests will
include some of them. Of course,
your teamwork is encouraged during your preparation for the tests, but is
strictly prohibited during the tests. Please note that cooperation,
interaction, cheating, and any other forms of academic misconduct during the
tests will not be tolerated and will result in serious academic disciplinary
actions specified in the Student’s Handbook.
ECO 370Y Course outline:
The following course outline is tentative and may be subject to some
revisions, in which case the relevant announcements will be made in class and
on the course website.
Part 1 (Fall 2006 Semester): Incentives and Organizational Structure
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Week |
Date |
Topics |
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1 |
September 15 |
- Course introduction
& syllabus review - Starting with
one-agent static models - Efforts and
incentives |
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2 |
September 22 |
- Efforts and
incentives (continued) - Risk and incentives |
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3 |
September 29 |
- Multiple tasks - Asset ownership and
job design |
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4 |
October 6 |
- Introducing
multi-agent static models - Influence activities - Relative performance
evaluation - Teams and cooperation |
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5 |
October 13 |
- Teams and cooperation
(continued) |
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6 |
October 20 |
- Tournaments and
promotion decisions - Subjective
performance evaluation |
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7 |
October 27 |
- Introducing dynamic
models - Relational contracts - Career concerns |
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8 |
November 3 |
- Efficiency wages - Deferred compensation - A ratchet effect |
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9 |
November 10 |
- Midterm test I |
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10 |
November 17 |
- Midterm test 1 review - Training and human
capital |
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11 |
November 24 |
- Introducing
organizational design models - Authority and
decision-making |
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12 |
December 1 |
- Hierarchies |
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13 |
December 8 |
- Organizational forms - Resource allocation
and transfer pricing (time permitting) |
The reading list for this part of the course is available on the class
web site.
Part 2 (Winter 2007 Semester): Boundaries of the firm
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Week |
Date |
Topics |
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1 |
January 5 |
- Theory of the
firm: Overview |
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2 |
January 12 |
- How have firms
changed recently? |
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3 |
January 19 |
- More theories of the
firm |
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4 |
January 26 |
- Final
theories |
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5 |
February 2 |
- Midterm test 2 |
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6 |
February 9 |
- Transaction cost
economics (TCE) |
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7 |
February 16 |
- Evidence on TCE (1) |
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8 |
February 23 |
- Reading week |
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9 |
March 2 |
- Evidence on TCE (2) |
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10 |
March 9 |
- Property rights
theory (theory) |
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11 |
March 16 |
- Property rights theory
(evidence) |
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12 |
March 23 |
- Core competences |
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13 |
March 30 |
- Organizing innovation |
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14 |
April 6 |
- Good Friday –
University closed |
For each topic, (at least) one
article will be posted online that elaborates on the concepts covered in class.
You will be responsible to study the material in those articles for the tests
and final. Ask questions during lectures or come to office hours if you have
questions on that material (some readings are difficult). In addition, each
week there will be a case study posted prior to the lecture. Every student is
responsible to read the case (you might get cold-called during lecture) and it
will serve as an introduction to the class discussion in the first 20-40
minutes of the lecture.
[For copyright reasons, you
can only find the handouts on ccnet
– login and select “handouts” on the main page]
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Week |
Date |
Article(s) |
Case study |
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1 |
January 5 |
1.Crises and change at
GM |
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2 |
January 12 |
2.
Roberts (2004), chapter 3 |
2. The future of the
firm |
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3 |
January 19 |
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3. |
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4 |
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4. Consultancy |
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6 |
February 9 |
5. BA strike |
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7 |
February 16 |
6. Fashion and designer |
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9 |
March 2 |
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10 |
7. Computers for rent |
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11 |
March 16 |
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12 |
March 23 |
8. Core competencies |
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13 |
March 30 |
9. Market for ideas |
[This table was last updated