EBO2 Micro 2 – Incentives and Organization

• Topics

  How do you run a firm effectively, especially when it grows large and becomes a complex organization? What is the role of incentives in achieving this goal? Building on the insights from EBO1 about human behavior, in this course we open the black box of the firm, uncovering and understanding its internal workings and dynamics. In the first part of the course, we use the Principal-Agent Theory and insights from empirical work to study how incentives can be used to ensure organizational success. For instance, how should firms design rewards that align workers with the firm’s strategic goals, while also cultivating an environment that makes the firm an attractive workplace? In the second part of the course, we study the design and management of organizations. Here we explore questions such as: How should tasks and power be allocated within the firm? Which factors drive the choice for a particular organizational form, such as the firm’s size or whether its business model is high-tech or low-tech? How might organizational structure and culture influence things like technological development or sustainability-related goals? We achieve our learning outcomes in a very diverse and applied fashion. Our teaching methods include, among others, case studies and in-class experiments.

• Learning outcome

  Upon completion of the course the student can:

  Knowledge:

  • Compare different organizational forms and incentive schemes, understand why firms choose them, and analyze potential consequences (including unintended ones)
  • Understand the motivation and implications of every-day concepts such as bonus schemes, promotions, hierarchies, outsourcing, or teams
  • Understand how incentives and organizational structures may promote or hinder technological development or sustainability-related goals

  Skill:

  • Design basic compensation contracts
  • Discuss suitable organizational forms and incentive schemes for specific firm types
  • Utilize acquired knowledge to analyze the success and failure of major real-world companies

  General competences:

  • Combine theoretical and practical insights to make informed judgments on firm decisions

• Teaching

  • Regular lectures
  • Practice session(s)

• Restricted access

  None.

• Compulsory Activity

  None.

• Assessment

  Final school exam, 3 hours. There will be open questions and mathematical questions. Digital exam for the open questions, and pen and paper for the mathematical questions. The exam must be answered in English.

• Grading Scale

  A-F

• Literature

  Brickley, J. A., Smith, C. W., & Zimmerman, J. L. (2021). Managerial economics and organizational architecture. New York, NY: McGraw-Hill.

  Goolsbee, A., Levitt, S., & Syverson, C. (2024). Microeconomics (4th ed.). Worth Publishers.

  Milgrom, P., & Roberts, J. (1992). Economics, organization, and management. Prentice Hall.

• Permitted Support Material

  One bilingual dictionary (Category I)

  All in accordance with Supplementary provisions to the Regulations for Full-time Study Programmes at the Norwegian School of Economics Ch.4 Permitted support materialhttps://www.nhh.no/en/for-students/regulations/https://www.nhh.no/en/for-students/regulations/and https://www.nhh.no/en/for-students/examinations/examination-support-materials/https://www.nhh.no/en/for-students/examinations/examination-support-materials/

• Retake

  Retake is offered early in the non-teaching semester for students who were registered for the exam at the time of the assessment in the teaching semester, and did not achieve a passing grade. Other students may retake the exam the next time the course is offered.

  For detailed information regarding the retake policy, please visit our website: https://www.nhh.no/en/for-students/examinations/retake-of-exams/https://www.nhh.no/en/for-students/examinations/retake-of-exams/ (copy url).