oo “Dudaitiok Srganibon! (na) DAN 2 Economic and Political Theories Concerning Indusirial Organization srry ut apr in ne Wit te hart ce i i mcr eae Co ony To at exe het Wa et td nthe irate the nar ihe mah at uc? Aad Te what popron of a Be pa he arc st, cmt 70 Sees in i See te iy compe’ Fh es aaa ech tly nd sso On Solel ompation poly oa teat omy acl amet se ca AE pl eibnee Yor J 50s SE ea coin too pose sees oo een mess Tet a preg reo, cn er et or gig net oe tg tt ein anna om torctotom. tothems nig interes bee, ar mo depends 6 wt _cepuomic theory: o ae aapter we discuss this theory in ‘broad out- eon oe chapters wh vais Pe Boe In her sermons cine cea ec] Iypihers insect. ree eek d cooromis an Pntcahenies Concerning edna Crpsizon 10 srves veh general ent or retin th oy Sie Saath Sil ni i 1 ee ey farts oc ean con, Fo rae eed potomant as inetd com nak oc ey porte deeming ES! wel Calieh the canon. eae at ry tthe are af mums hype {pail Seceming th deen of the see shader eis er fc expe a the pec Si nr finde the mat peso seating ee Teng of thse hypoth soca ch eve ent tian oan ese vei ED on cape dws: a to fhe sy eco hay cr cpl inp ete Co Fay unde eines of fed The devel sent ram Sone wen HYPE oe er cy ealrasouce othe 6, “Stn easomie try & oe een Sete cts a stan wei oe se eters are of hae elspa al come Wah etomane yc mes av feorale and weve fe Mat Cn eo ogo ten eet et he eco geo nly twon por morn oily Wt Sc a ween rena hn rs ctl Sento conan HO) 2erT a he ehzret pevonnance of aca Huts, Bests 22D ot epezdenc on economic thor, ii natal tht res tne ah to survey tc lmmeliatly evant spectsot conte. one ceomontsnory vps the mir osetaion of Ou sa hee ares ober prs eet 6 5407 sic the erzsation provided by exanomie thst the fect of Sndustril org ton fe hem geet Fatale Fagen roel i gma tee ome erie ce fe la cn elcome~ sd the relationship Between the rhe of concentrated econ mat a theconeenton of el power in srhie gover "Nunca prt ves Goines have been advanced bearing on uh muted The nner probaly fora, fr example with sitet Tay thcry tnt consented big asics undermines the Pee of a jteroninn demoerany with Marin and neo Nain heres ef the response ofpolitel ard socal organation& ‘Sanger rpnation er wilde arry hat manage ‘erlon”n big busts i cretng a elite peesnal snes ‘emtres who wl supply th uta cnoling gary in city ‘Mogi the poiteal inpentons @ dewlopments in indus cxgenation inde conte an ingwtant sje for sty. we do {el enpnss thee inplestonse here ebow hon hs ok ‘We dross afew such tors ey ner in hi chapts, largely ekgound fora ater emiatonot de ele of pole ov eppome! {0 soil econo, condetions in tha development of puble pol: Gordes casa pation Dut forte ea pert or mages Sod eppraal of industrial erganition se developed fom ait Sectlle cgtesteng conan o sata welfare fete Jutho prodacton snd doin gods. Seer of thir shape dort St to orveing nt pat af the content of cron har he espe selevent ton sty Sra enpentaton t,o, to ae comments on slvan flit theses Economie Theory: Genoral Content in stoke dont ler te on andl Herr concent coon arti, bt onl oe cone ee of Se Se ala at he org of en SESE SSon Tis thy, whch ha amar Tes unin on ee Fp cote pal devoted to flowing cd 1, Anajaing th way in-wlch an exer een fnalns. it eee ee Teta te echt th spetion och ToT ng why opera and baw des: yeteishing oil Ete becca ts bls onto nd anda To eee Sopa arts oth te “Slavediaiog how te enerpse comomy wil pexfom, ax epe- nat ar tence ole prenan aw aro SRT Hey ih change a shunt or crests "chang th plone oh concn proces hich - ‘zononl enc Poli! Tvl Cancering Inve Oration 2 slvestheorcing shot whet sors of perfermance, ba forthe economy I a whole and fer segments of wil make the reaximem cotribe- ton toattaising certain defined goals of social welfare. “The procure mod ofthis econ theory 5 generally de sibs “dedastives) That, & Best draws upon olseraion © ‘ern enpinal sore atin he {Sloat ttt atonal and Ig frome, mark star {ores and sofort and tales hae geeraliatns lato assumption {Cethcriing Th by opal proves eces om thse assum tons tow th ecanomy wil oncon nod perform In yrbus sume ‘Stutanens Inthe ocd, dnt loi alo wed tac thin the impact of vastus rts of prfaance om vans aspects Srl waar Hav thy dean frm, comely er nly hypothe concerning th character, ca, nd conseyenes coon bhava, Empl testing of thee hypotheses Is needed {contr dsc predicts ud evaluations 4 in niton to haveg @ defnte mabod, conveatonsl eonomi thay hae tape ard ied xetation, doe ot compen te atonpt fo caplan ll pct of the Beevior of evs 0 {Pou caged i econ sty, ort eveant al apt of hee cians Mater sol ttn, coral attode poten repression Tom tcovomye cts and the Ie ae gona megeted y euch theory, Th the ppeologiea tudes of workers toward employer i i vera te ks bebe mplyment ttn se polite ety. the cece route felony as oppor to eal employment cn id AiGst sd group poycudogy also nae Hy to be melted. ‘Cenoaly. he poRicl and saci repercusion of: Srgnnvatlon and actvy hve et been corded convention ‘Snot lary these watts are et ot theories er dpine. ‘Wist conventional comes theory docs empiasce are thoe phenrncna which Inpnge dry onthe determin of materi Wines represented fe the vlune of goods prodced and the way Thich iis dal so pefornce, therfore ds ey rien to eplining and prediting thse expats of pesarmance THE Girly tect Rated welares Por Gs Ovenll como hee ian emphsts onthe genet Teel of emplopmen, the efciency a. tine psn srs ompton of ttl opt ond th Sistttion of insame, For spent ofthe economy, emphasis is cor sean tn ch hinge the slatonoip feet cats, the tebrl plats nds the late eve of wages diferent cepSimilar, conventional (that i nda gh Ieiiseeee ft oi fee nthe pene met Ineo eer oe Fen caring som eet actor of mara ok an mh entce yt ‘ese wh Se eee io Aimenions direct inked wihrmerons ee Asie the Jas hig contr. Not only des ‘Silvie mony nen ce ee ome Tao hema 2 Be alts ite forerample eh ee tcancer ston al ft ot maa thes ae eatin of moojand re ei Moraes eats comity are et ‘in atodent onda eae . Ta Spey cle tery Lehto he tear Bonen must Ti tecgpeenenee | recent Sel ie sty pectin on rt Sa THs rb rae ns ong other tgs the analy of eed Say tr nai ima be dsigmted as ger Die the intention meee General Equtbxtm Theory ee hen cpt te bg ey fo tn ‘dua fmsor inte 2Sctrmin wat et of etter {tameot of the spectad erate ee emaa {ermanse are deeoped wisi Indastes or other stom Se ‘A pat of tal ofa Dats by ay mene spe of pele siapleIncton of the ae seer. Then we eon tty pefomance Yate et ct ae ection induding the rover Ester teat eet Pon inteation. Shoe overall gore ie en, te il poem oP aan Ds rl erm Sl Be Se Pst an fm of ech mae eee dell bof te mt ce irartheye page. Devconing «poate at ce Ines they fen cae et lon any a ol fo he fre ofp a ty theta ity me bee ga im a cap at i ocd eae «mon or be srl pee nl id Haw en ae Since ef te my ee int eng oan ‘Proportions a eh no| 26 tel Oren he dierent ponds lat make wpthe ttl outptf the coonony shauld {ie deren Ecorse A fo ge amare satsftin [rom fetal Peau Thus been demonstrated by general elim theory Sete operon protcton afl dren goovds-that hel ert of total ntpnt=huld reat if renrces were allot, coe eduction ok llerent goo x svc fy that the al ae eri prouct of each resource was the sme vey He of Ok dlectins ‘The loa or margins hour of Wor we in prodecing er ceampe, would add an cuit of the god wi Nod eae rac te gonemerss the vals to them ef tho added output of TUiaaginl bur labor wsedinprodcig every other got wt canal ner faceted, then a cory rem fer the nts of ent of inva dts may be derve—csetilly 5 norm orto eteney.” In bi, I we astm lids: t Be Pay: SAIS etn pres foreach sou (2 te mae 8 Nt i ae gad of labor, th composition of ontpt would deat fa ade lene Set et rte of cuit ot that Level ‘were the marginal costo ofthe various goods were sl Tae rics th gods Fs then, mont norm fre rae er mehr is that ontpat at should be sochthatits marginal particu SE aE tom Such a at of entput normative for ch Ie, dang oe nemly ll duties conform to tis ame nor. The “aston then nal to be soght fr eey fn, sa etlement by soy one indy & uly normative af in the sandpaint of thee yp on total mp outer trough ther Snpact on the provers sat speed meney and thes manain a stenly fw of ONY ire tic the covery The qunion i heey x what he re rere net Eng son spending oF various rats of profit an Ns Sie ee oeiguoosly edict. A similar problem f enceuntert fee attempt te evaste the role of profits n inducing technlog ee crs or of advert. expenditures in timutating the fw } } Where of total spending, tee toyed toevelap partial norms in exes He thes ts indents are I deer or abject to ride anges of wrcertaly- Shse gnealeqlibrum theory sor ony avaiable source of noms for cal ln el nde performanc, ever rele poforma iy ten fclncy production and of aaa gts, With resp! to several oer dese nome of Taller perterance, the indetions of the tery ae ether - Thgbs cated In rach form ast to Be operationally wl fo Tae boukwe donot ttemyt to develop and justify specie noms, but rien merely set tiem athe ectson fr evaiatlon ates a the allocation rico Theory ‘ice ther els end prods de chavo and perfomance of a Home to seig malts ote ods tie rue (nd In ss de at for pode hey reba X padres the ats of Se ich rm a indstrles pode, how eft they ae rer Ah lain of pee baer Too oF prdecon, te Hailing oes pts gn Tag price theory deduces the way in which reduction teh- olsen, the peyehelogea propensities and rctivatins of business Fee Or censumer and susTounding Institution ieractto ice) ne and industries to flow predictable patterns of market conduct a aoe ite proceble pattems of matiet pformance.1¢ fates so Fer oigh a proces of deduct, tow cangs in ermurdog aed pile and cupotin 8 osc be god It oe of pce theory to pede the way rcs indie dusts ovary | | Er rere! struts. 1 Us provides BypO- ig msocalions of market structure with market conduct \ eT ctnauncehypethecs that are ley relevant to the empirical ‘Sey of industrial egantnton. en ribel of price theory i that of econemic theory Bem cenlige tbat fc posed by describing presumed determinants = Cay Sc of rumysions and then deduceg the consevencs [0 eet and perfomance of teseasumed dtermiints—epealsgt hp sets of ctr Chats rcs ry depends esl on ee sre tae aaa re pope of byes the tela sep oe used in produton and the meetin of fre ‘Tar arodie and sll gods, The bare asumption encersing Myer Aa pene Ik ues cee gtr among, fleet sat of Pe a dn tey wl tend to pease more o any gor 5s Boel ney Toe es Seating foray est Bn ree Pie jor denard o ie darged The base assunpUans core: se esogy ep ttre ns the conto yon of rms res ora eit chang f er ntes ef otpt. Important sree te a tat ese vm tency of ot eeu of ett aaa fe nt orfin expanded vp toa cea se, an #0 (Gates vara of unit costs ith changes the rte of akin efany pnt o given size. The bast assumption coneing ‘Tacntaton, eta pre faction, of frsin producing and sig aye eo —, saseete stg pc, opal costo‘ 2 PEPE tier is end he scumpuon equ Held fo oer ee ya evenly a oper motiratioral patter, but itis bo Se ie mest scout sinpied dtpon of what mos tosiness fete tod oy and haat dary nde farther asso 2 ting conden Tes ncide asumptions concerning the Se bayer demande or pets respond teres in eRe tons ert manner In which Amprovenent oF de ae rm its ol atect podocion cet a buyer dns cern Pampions dedetiveteorzing ean proce mor be ce dete oredicions ofthe mart performance f enters {ner vara config conatons Thy thy velo rth of eumptns, home, a ae se sey ecg th con degre errance of ene and estes does not depend SI ea a errata dewand,cst-onst, srs cota oe ci alte crac ofthe otiaton offi for xa, Tpasieeatn), These tng depend lo on he tours of, ret st te al Hack aectre may ge te ht oh SE ent fi nae on Fe Se art petomance prtel by tas cmt res en he ee ay competion among rvs a entry ope er one om ema a hore eid a ged 5 ovals and Palit heros Corcanny Inde roatnon 27 types of market stator which Andis may Baws, Sine estate el predicted how market performaace sald fier ‘Shon indies wi diferent types of markt srutere,Ithas cast fied mart sttores malay acordig to > The degree of slr corcentation-whether the numberof elles In ?as ey stany. fom or]ans and what inte lative ies are Je extent of protuct eiferentatenwbcther tho procs of com "pti srs ra wriflorm a dential, o are dilereniated by design, Drening and oon. 3 Toe eatin of entry to the Indus represented by the advantage ‘har ctaishel Br have over prospetivs new entrant Sims, and e- Aetng the Force of potential competion 1s a regulator ofthe maket Conduct and performance ofthe establish fem iw ach a martt csfeton, theory can pred how behavior wil ifr among, cases of meets, It proces to deduce, foreach ‘tegory of mrket state, () how fms will react to the bast de- ‘an Zn, and slilarcontolieg codon to determine their out tut, prices sling sss, prods, and sofort; nd (2) how the om Pilve iteration ofthe plies ot ons wil operat and what eo Prnket performance it wil brag for, Ths deduction obviously em ‘hase the lof prof maxazaton, die market proves of inter eon ainda fms adjst to each other actions, end the evento Sqm adjutnent wie soul beached. Witheut developing the ductive aralyi, we may summarize ‘mcely san stateie preicins of price theory concerning the rela- onsipr of market comfuct and. performance to market structre see eicoretel preieone will fe dlacotnd further fn subsoquent ‘apter dealing wth acl seller concentration, product diferent: tom conditions fete. and market condos arto Strcture and Portormance—thelnivence ‘A primary distnetion smong Inds is drawn on the bass of seller Enrcenttion The spe familiar distinction ted olt, 1 Atomistic Industries which many seal seller are fa competition I Oligopote hustes (ligopais), fm which « few large sles areincompetion. 111, Menopolze inlstres (monopolies) tn whieh «single seller sup plies theentir ontpatgolagt te make. Price theory reaches the fllowng corcaslns abot differences fn‘at dost Orpmiznon market conduct and performance among these brand enlegorts of - ‘ties. each seller 0 sal thot he wil take the dl oo a Santee on poe Cale rent ont ya ‘Fodet thy aiiagenomter. aya cn wy and markt pc rns coy anttipugmahs pertesses fo nay my be we My oat a eed nd pe ele oe pat ee a ac piv sted erat na 9th ee eats ms ay ed ent nel wilt ao ee rth wine made ety fra SOF toa sly st low longo nds ext dete cet paced te pa ae OT 2 Eps Ene orf) make pe = Ss mn! nt oe chs orl ro) (2 SBS etry which nso tie oveing cs ree pat a eae he moral pete (ter om re ae npr mst theo gig eE Sresepbeeto 2 singe sellers omits conf he mat eR Alon compete ny of gt JS nlp a rover he lei etc een ps ha irises.) saree eat atc ic tne Hs cosa wi do 2 By Se Raut lgr tort ener tet cont ‘eer ond bom pot ih masini i a heen teria thos at of i ft. fn and ote things being equal produ ‘Oat 2 ling pres highend the monopole eam m9 aces ot (on sv avin nineties), Mane Pred raten end monopolist ezess prof ed (0 es. NO Tete ar unique predict xn be made 1 the tenia fcency wee loop a ht fenced bythe sale is perms, Showgh deeb efiieney ix qute posible ised afew lage sllrsn sme aoe e ttre | Sat omg and mopoly. Ther sil vay among sl ¥ rat 1x al Yo? i aati ee ee vain ai ot ot nh ne in ng aves output to inliaccemaket price wt stents a is Fe ctr tacit encong by Rees Bi cua ed pce aljusnents, Conexjently, thre a or roninicpentenee, oft prise and outa aeliciesof rls, ee ech “Til detenmin is pres and utp inthe git of conewren moves or {else rection: ral es, Inthis conte preditionof tho market ‘Sn patria or pice plies of fim or group of ms becomes mich move dif, Tadeed, unless price theory now adopt forer ‘ampton, comic puters ae theareicaly indeterminate, el 0 ‘ingle dint pedition can be lgeally dedced. 9 ostgnitts, however aeevidety pestle, led gO) tne a sion among sval sll, to act sinclar wimonepols woul, ( inenmpltecotrion tne See rcpiasy notes ten st edie cai: imate with ech eller See Se tae pecnanes moped tn er cemaredin te eed w inj mop Ol ee ee ee yee aie ce me sit a Sant nigcompehrd ont manic a ee ae cups pe Sb, ere Fe ts ped th ric To he gad rn oe tne ler, om ako asta er gl was oc) met te a tnt Sl om, pte oe ioe efter cena en] Fae es ee oe ie bel Yer hte ow len: corte the a erections ogy Chapter Marko tractor a Performance — (helotannen of Product Dieresttin rice theory dnws 2 second ditinton awong fdusties onthe bss of peoctdiferentiaton, dividing ther nto: 4 Iti th encarta wh pets of a In, Industnes with product differentiation, in which the products of ‘arousal are ifeeniated by dete, qual, banding, et29 dai Ovnteton covonie Petie hee Connie nun Onanion 31 “This lait i combined with ht bed on se concent artt strc ad Peformance {i yrotce sn Ate Dstt dsr conetratn sae 3 thelteenect he Conon et Er 4q_Ht shave Ths recon pmogzecons ed Siete Dice hory sls dines indie nthe basi of he coon fede peach Ae |e rt if enh my een ‘of tho salrpolny or mart conduct ofthe llr What we have ateady i es he conf entry to an rs sates ugh the adv : Irian of cotor rling pon anh ablched Brn ave ove Si aout tonic and cligopltic induces shoal ppt gona ase eg oaling i ch tabled bre ee ae earene | | (coeainaiae marty, ra by the degree to which che eae resenlyelate the ces above mina roc ify nted, the prot are fretted, the fallow See neta ere 4 or abe pee Fist el wl havea inst 0 tae, t tty ed et a ie fr ‘Mertng and final expenstore toatl eer el airy ed ae er eee Rayan Tors pac resmablyfpsating the volume of Hes Corsseseare kre ba eat iro ‘hs expenditures so as to maxinize his prot Second, he wil also have esc it eer et eo oe brs ie ye tome {ease te mot prota aunt. rancor coo da 2 Metered con that nes eet whi ae ap Sar pe, Third tc seer mey beable charge a price somewhat) presi but not high enough to permit established sellers fo set “Tifeent from that of his competitor (ar nnpssibnty wi Tomo: {oie monopoly pric without tectng entry. Revco product), beens of te allaglance of particular buyers the ‘2. Blockaded enry-that i, barrier to entry high eneugh tht exab- {reductof particular sellers, snd thas mey excise some "mannpoly Tish llr can ns olntmonepoly pice without listing ty. fore nrg ono etree eM, RE ne On Seay niotunately, price theory has nt bom derelopel far enogh to shonldintheory tend doen Ite mate’ condita perme permit very efits pelcins about the diferencia pe into wae at ples ong Ht selling pr wich Formance that reat fom thse Ins of condi. Abnut all at may seb Ros vo Cho oes 8 Fea ty: pemee oa on Oe eee eae i tin posi thelndty wolgopolii ed the estab {Iterations (tee wil bone snesprovon xt which abe ete sas age eng fo ube nema ftle {in tol on ed prby ew of png. rms by same rts pics on ety Second the acon of else ims toc Nrownt (the lvl oslng cot lop may ees oF atx { BO ee ae ne ae et seca a aaa TENT Be Sint pce il ides nity, mene ny oe, te protmby tend the longum t Kop that pie from blog exceeded. ‘or nt the lopli are “clase” In determining the smont of a eling ei "moth wath En ptt compton mesa by the condition of ery influences market conduct end performance. FEvaher theorsng concersng tt th effects andthe determinants of :{e)any ofa number of patterns of proguct qa, fpovtct vat, and product change over tine may emerge, hough ie tects i Darposive product change through time is geverally encourages; (d) pee ceulion ny cr Chater the divion ef the market amen sellers willbe Inflaenced by prsct ‘An Elementary Strctural Casstteaton ‘erertation, perhaps sccoustng for somewnt persistent derees amare ee eek ne eeoe ‘When induses are cused nd sibel on the bass of ser itis (9 wus patene of pce difeerce sang cme x wl ae ‘coscentation, rodet diferentation, end the cenition of entry, the Sees oon tation. oe GEocn ten berg od ier) (cap recreate a 1. Atomistic induses IA Withont prod derentation