SAN JOSÉ STATE UNIVERSITY
ECONOMICS DEPARTMENT



ECON 121
Industrial Organization
Thayer Watkins


Text:
Douglas F. Greer, Industrial Organization and Public Policy

There are generally three sets of influences on market price:

Market structure refers to, among other things, the degree of competition in the industry. This may have to do with the number of independent competitors in the industry. The number of competitors, however, is not necessarily the only, or even the most important, factor determining competitiveness. Usually, but not always, the demand side of the market is perfectly competitive and it is the supply side that is of concern in matters of market structure.
In some industries a single seller may set the price so low no competitors are tempted to enter the market. In other industries a single seller not having to worry about about potential competitors may utilize its market control to practice the classical monopoly pricing of economic theory.
Government regulation is another important factor in the market structure of an industry. Public utility industries are often monopolies but their price is regulated by a public utility commission so they are not able to take advance of their market control to earn monopoly profits.
One major approach to industrial organization is the Structure-Conduct-Performance paradigm. STRUCTURE such as there being only two firms in the industry leads to a particular type of market CONDUCT that determines the social efficiency or PERFORMANCE of the industry.