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Unit of study_

ECOS3003: Hierarchies, Incentives and Firm Structure

This unit deals with the coordination and motivation problems faced by firms. More specifically this unit examines: whether firms use price or command mechanisms to allocate resources within firms; the problems associated with designing incentive contracts; the principles of efficient contract design and; the real world applications of those principles. The final section deals with the manner in which the coordination and motivation problems faced by firms determines their financial, vertical and horizontal structure.

Code ECOS3003
Academic unit Economics
Credit points 6
ECOS2001 or ECOS2901
ECON3003 or ECOS2306

At the completion of this unit, you should be able to:

  • LO1. demonstrate an understanding of important economic factors that help shape the structure of the firm
  • LO2. analyse the way an organisation allocates its decision-making rights, the way it rewards its employees and the measures it uses to assess performance are all interrelated
  • LO3. understand the concepts of: freeriding; principal agent; incentive compatibility; individual rationality constraint; real and formal authority; prisoners’ dilemma; coordination game; and multitask problems, and be able to apply these concepts to real problems faced by organisations
  • LO4. critically evaluate the effect of changes in technology, product market competition and globalisation on these decisions about the internal structure of the businesses, not only from the perspective of the firm (attempting to maximise profit), but also from the perspective of a policy maker (attempting to maximise social welfare).

Unit outlines

Unit outlines will be available 1 week before the first day of teaching for the relevant session.