In the last few decades, mainstream industrial organization has developed very powerful tools for analyzing firm behavior within a fairly narrow framework. In this essay, I argue that while these tools are important, their development has crowded out other important aspects of firm behavior from the mainstream of IO. I conclude that in order to continue to grow the power of IO to predict firm behavior, the field will need to embrace aspects of firms that have moved away from IO in recent years, including innovation, boundaries of the firm, regulation, managerial incentives and decision biases, and others.
Boundaries of the firm Innovation Managerial bias Oligopoly Regulation
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I thank innumerable colleagues who have shaped my thinking about industrial organization without suggesting that any of them agree with the opinions I have expressed in this essay. I’m especially grateful for hours of valuable discussions with Jim Bushnell, Joe Farrell, Ryan Kellogg, Chris Knittel, Nancy Rose, and Carl Shapiro. I have no conflicts of interest that relate to this research.
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