My own experience with organization and transaction cost

    I worked at a small software company before. I was an intern there so I did not know the structure of the company very well. In my opinion, the company was structured like a tree. The general manager was the root of the tree which has several child nodes such as product development department, human resource department, administrative department. 

    Product development department is also divided into several sub departments such as C++ development, server maintenance, Front end, back end, etc. In each department, there is a head of the department and there are many groups working at different projects. I was an intern there working under a C++ project group. As an intern, I did not have much things to do, just sat there to wait for the order from our group leader. Even if sometimes I got some work to do, it always was some trivial stuff like fixing some bugs or something like that. Busy time only happened when party A changed their needs and the deadline of the project was near, so everyone in the project group was busy changing the code to meet the new needs.

    I plan to be a gameplay programmer in video game industry after I graduate, and I think recognizing transaction cost is very important in video game development. In a top-down design progress of a video game, a designer have to know what are the target audiences for the game, which type of players will buy the game. If the game do not please the target audiences, it will probably be a failure. 
    
    Transaction cost also exists between publisher and game developers. For example, the developers of no man's sky describe the game to be a huge universe sandbox game with tons of different planets with different features for players to explore. The publisher was really amazed by their plan of the game, so they invested a lot to advertise the game and promise the players that this game will be fantastic. However, due to lots of reasons, the game only fulfills approximately 20% features as it stated before and became a huge joke in video game industry.
    


Comments

  1. Professor ArvanSeptember 15, 2019 at 1:56 PM

    This post is somewhat short. The minimum requirement is 600 words. Please try to satisfy that in future posts.

    Given your plans after graduation, I wonder how studying economics fits in. But perhaps it does in terms of getting the organization structure and incentives right in the place where you you end up working. With that in mind let me comment on a few things you said.

    First, I liked your analogy to a tree with branches. If you turn most org charts upside down they will look tree-like. But top management prefers to be depicted higher up in the diagram, so as a rule we don't turn org charts upside down.

    In your second paragraph you mentioned party A. I didn't know who that was. I guessed it was the client, so it must have been that the company where you interned was making customized software. If that's right, you really should have described in your post. In general, you need to give more context so a reader who wasn't there can still understand what is going on. I don't know much about working at such companies, so I need more of an explanation.

    I did write in response to another student that interns are sometimes idle is consistent with Herbert Simon's view of labor as a buffer. The company may not mind you sitting around some of the time, if they know they can get your working all out at other times, when it is necessary.

    Then, regarding the last paragraph on No Man's Sky, I again needed some background information to better understand what you are saying. But I think it also should be said that many vendors "over hype" their products especially while they are in development as a way to promote them early and stir up initial demand. As you note this can lead to a time inconsistent approach where after a while the market comes to understand that they hype wasn't backed by substance. You might have then considered another game that started out more modestly but became very popular. There is some interesting economics in asking why they both seem to happen and if the early hype can sometimes fool people. Preventing that would be a kind of transaction cost.

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    Replies
    1. Joseph Schumpeter Econ 490 fall 2019September 15, 2019 at 2:37 PM

      My major is CS+Econ, and I think tranfer to CS engineering will have too much trouble for me, so I'd rather stay in LAS and graduate with this major.

      In CS, tree data structure has the root at the top position.

      Party A is the client. Party B is our company in the contract.

      This is my first time writting blog in English. I will try to provide more information next time.

      Delete

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