Organizational economics (also referred to as economics of organization) involves the use of economic logic and methods to understand the existence, nature, design, and performance of organizations, especially managed ones.
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Organizational economics is primarily concerned with the obstacles to coordination of activities inside and between organizations (firms, alliances, institutions, and market as a whole).
Organizational economics is known for its contribution to and its use of:
- Transaction cost theory: costs incurred to organize an activity, especially regarding research of information, bureaucracy, communication etc.
- Agency theory: dilemmas connected to making decisions on behalf of, or that impact, another person or entity.
- Contract theory: ways economic actors use to construct contractual arrangements, generally in the presence of asymmetric information.