Structure–conduct–performance paradigm

About: Structure–conduct–performance paradigm is a research topic. Over the lifetime, 40 publications have been published within this topic receiving 2178 citations.

Sunk Costs and Market Structure: Price Competition, Advertising, and the Evolution of Concentration

Abstract: Sunk Costs and Market Structure bridges the gap between the new generation of game theoretic models that has dominated the industrial organization literature recently and the traditional empirical agenda of the subject as embodied in the structure-conduct-performance paradigm developed by Joe S. Bain and his successors. Because many results turn out to depend on detailed features of the market that are difficult to measure, some observers argue that the game theory literature offers little basis for the kind of cross-industry studies that have formed the empirical base of the subject since the 1950s. Using current game-theoretic methods, John Sutton reexamines the traditional agenda. He argues that despite the "delicate" nature of many results, there are theoretical predictions that turn out to be extremely robust to reasonable changes in model specification, and these results should be taken into account when looking for statistical regularities across a broad spectrum of different industries. Sutton assembles a matrix of industry studies relating to twenty markets within the food and drink sector, in six countries—France, Germany, Italy, Japan, the United Kingdom, and the United States. He combines theory, econometric evidence, and a detailed account of the various patterns of evolution of structure found in these industries in a rigorous evaluation of the strengths and limitations of a game-theoretic approach in explaining the evolution of industrial structure.

Sunk costs and market structure : price competition, advertising, and the evolution of concentration

Abstract: Sunk Costs and Market Structure bridges the gap between the new generation of game theoretic models that has dominated the industrial organization literature over the past ten years and the traditional empirical agenda of the subject as embodied in the structure-conduct-performance paradigm developed by Joe S. Bain and his successors.The new theoretical literature has engendered pessimism in recent years because many results turn out to depend on detailed features of the market that are difficult to measure. This has led many observers to argue that the new literature offers little basis for the kind of cross-industry studies that have formed the empirical base of the subject since the 1950s. Using current game-theoretic methods, John Sutton reexamines the traditional agenda. He argues that despite the "delicate" nature of many results, there are theoretical predictions that turn out to be extremely robust to reasonable changes in model specification, and these results should be taken into account when looking for statistical regularities across a broad spectrum of different industries.Sutton draws on a wide range of historical sources and on an intensive program of company interviews to assemble a matrix of industry studies relating to twenty markets within the food and drink sector, in six countries - France, the Federal Republic of Germany, Italy, Japan, the United Kingdom and the United States. He combines theory, econometric evidence, and a detailed account of the various patterns of evolution of structure found in these industries in a rigorous evaluation of the strengths and limitations of a game-theoretic approach in explaining the evolution of industrial structure.John Sutton is Professor of Economics at the London School of Economics.

Foundations of the Structure-Conduct-Performance Paradigm in Banking

Abstract: This paper employs an explicit model of the banking firm to derive formally, and thereby assess critically, the most commonly tested relationships implied by the structure-conduct-performance paradigm as it applies to the banking industry. These include the relationship between loan rates and market concentration, deposit rates and market concentration, and bank profitability and market concentration. The necessary assumptions and simplifications implicit in past empirical studies are outlined and suggestions for future empirical implementation of the underlying model are presented. Copyright 1991 by Ohio State University Press.

Reevaluation of the structure-conduct-performance paradigm in banking

Abstract: In the banking industry, the structure-performance relationship has frequently been evaluated with results suggesting that collusive profits occur. These studies have been criticized for inappropriately accounting for entry barriers,ad hoc assumptions concerning the appropriate structure measure, limited samples, and ignoring firm efficiency differences. We address these concerns and find categorical support for the efficient structure hypothesis, and limited support for the traditional structure-collusion hypothesis when markets are characterized by significant entry barriers. The findings suggest the competing hypotheses may actually be complementary theories, and the negative role of entry barriers may be more important than previously thought.