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    Ch-2.5 Structure Conduct Performance

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    tsegaisrael444
    The document discusses the Structure-Conduct-Performance paradigm which proposes that the structure of a market influences the conduct of firms in that market, which then influences the market performance. It defines structure, conduct and performance, and lists some key variables for each category like number of buyers/sellers, entry barriers, pricing policies, and profitability.

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    Ch-2.5 Structure Conduct Performance

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    tsegaisrael444
    24 views9 pages
    The document discusses the Structure-Conduct-Performance paradigm which proposes that the structure of a market influences the conduct of firms in that market, which then influences the market performance. It defines structure, conduct and performance, and lists some key variables for each category like number of buyers/sellers, entry barriers, pricing policies, and profitability.

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    The document discusses the Structure-Conduct-Performance paradigm which proposes that the structure of a market influences the conduct of firms in that market, which then influences the market performance. It defines structure, conduct and performance, and lists some key variables for each category like number of buyers/sellers, entry barriers, pricing policies, and profitability.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    24 views9 pages

    Ch-2.5 Structure Conduct Performance

    Uploaded by

    tsegaisrael444
    The document discusses the Structure-Conduct-Performance paradigm which proposes that the structure of a market influences the conduct of firms in that market, which then influences the market performance. It defines structure, conduct and performance, and lists some key variables for each category like number of buyers/sellers, entry barriers, pricing policies, and profitability.

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    © All Rights Reserved
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    You are on page 1of 9

    2.5.

    The Structure–Conduct–
    Performance Paradigm
    Introduction
    • Structure is level of competition in the industry
    • Conduct is what firms do to achieve their goal (like
    profit)
    • Performance is whether the goal is achieved
    • The structure of a market influences the conduct of
    the firms operating in the market, which in turn
    influences the performance of those firms.
    • The structure, conduct and performance of a firm are
    interdependent
    • The main linkages are shown as running from
    structure through conduct to performance.
    • However, various feedback effects are also possible:
    from performance back to conduct; from conduct to
    structure; and from performance to structure.
    • These are represented in Figure below by dotted
    arrows. Several specific types of feedback effect are
    identified in the following discussion of the main
    components of the structure, conduct and
    performance categories.
    Structure
    • Structural characteristics tend to change relatively
    slowly, and can often be regarded as fixed in the short
    run.
    • Some of the more important structure variables are as
    follows:
     The number and size distribution of buyers and
    sellers: that is whether the market is seller
    concentrated or buyer concentrated.
     Entry and exit conditions include barriers to entry,
    which can be defined loosely as anything that places
    a potential entrant at a competitive disadvantage
    relative to an incumbent firm.
    • Product differentiation is any change in the
    characteristics of the product supplied by one firm,
    whether real or imagined, may affect the shares of the
    total market demand that each firm is able to
    command.
    • Vertical integration: Vertical integration refers to the
    extent to which a firm is involved in different stages
    of the same production process.
    • Diversification: Diversified firms produce a variety of
    goods or services for several distinct markets.
    Conduct
    • Conduct refers to the behaviour of firms.
    • Conduct variables include the following:
    – Business objectives: like profit, sales, growth,
    managerial utility maximization
    – Pricing policies: Possible pricing policies include
    cost plus pricing, marginal cost pricing, entry-
    deterring pricing, predatory pricing, price leadership
    and price discrimination
    – Product design, branding, advertising and marketing
    – Research and development
    – Collusion and Merger
    Performance
    • Important indicators of performance include the
    following:
    – Profitability
    – Growth
    – Quality of products and service
    – Technological progress
    – Efficiency etc.

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