A systematic treatment of the economics of the modern firm, this text draws on the insights of various areas in modern economics and other disciplines, and presents the central problems in organizations of motivating people and co-ordinating their activities. After introducing the fundamental problems which organizations encounter and explaining why they occur, the text discusses a number of patterns of response, with the aim of showing students why organizations are structured as they are, why they adopt the policies they do, and how to solve organizational problems themselves. The text attempts to provide a balanced treatment of both incentive problems and problems of co-ordination. It discusses, in simple terms, key elements of economic theory - contract theory, information economics, incentive theory, theories of co-ordination, transaction costs, property rights, labour economics, corporate finance and welfare economics. Real-world examples are used throughout the text, and important concepts are highlighted.