Firm Conduct in Structure Conduct Performance (Scp)
Firm Conduct in Structure Conduct Performance (SCP)
Competitive market analysis normally involves some reference to the number and size distributions of firms, the types of product produced, the extent to which established firms control prices, the ease with which firms can enter or exit markets, and the ease with which information flows between firms and consumers and the resulting conditions facing both of these groups.
The seminal writers in the field of industrial organization were Edward Mason (1949) and Joe Bain (1959), who developed a framework for analyzing the competitive conditions in industries. This framework became known as the structure conduct performance (SCP) paradigm.
As the name suggests, the SCP approach examines how the structure of industry relates to the behavior and performance of firms. An analysis of these issues gives managers, researchers and policymaker’s useful information as to how buyers and sellers behave in a particular market and the implications of this for profitability and efficiency of firms and the quality and availability of products and services to consumers.
Conduct refers to the behavior (or strategy) of firms under a given set of circumstances, normally determined by the structural characteristics of industry. The structural characteristics outlined earlier determine firm objectives, which in turn feed through to firms’ price and non-price decisions.
We examine firm conduct with respect to business objectives, price and non-price strategies next.
• Business objectives
The objectives which firms follow often flow from the inherent structural characteristics of their industry. Objectives may include the pursuit of profit, growth, sales maximization or the utilization of managerial discretion to pursue non-financial objectives. The overall business objective of a given firm is likely to determine how the firm behaves when formulating price and non-price strategies. For example, although included under
Competitive market analysis normally involves some reference to the number and size distributions of firms, the types of product produced, the extent to which established firms control prices, the ease with which firms can enter or exit markets, and the ease with which information flows between firms and consumers and the resulting conditions facing both of these groups.
The seminal writers in the field of industrial organization were Edward Mason (1949) and Joe Bain (1959), who developed a framework for analyzing the competitive conditions in industries. This framework became known as the structure conduct performance (SCP) paradigm.
As the name suggests, the SCP approach examines how the structure of industry relates to the behavior and performance of firms. An analysis of these issues gives managers, researchers and policymaker’s useful information as to how buyers and sellers behave in a particular market and the implications of this for profitability and efficiency of firms and the quality and availability of products and services to consumers.
Conduct refers to the behavior (or strategy) of firms under a given set of circumstances, normally determined by the structural characteristics of industry. The structural characteristics outlined earlier determine firm objectives, which in turn feed through to firms’ price and non-price decisions.
We examine firm conduct with respect to business objectives, price and non-price strategies next.
• Business objectives
The objectives which firms follow often flow from the inherent structural characteristics of their industry. Objectives may include the pursuit of profit, growth, sales maximization or the utilization of managerial discretion to pursue non-financial objectives. The overall business objective of a given firm is likely to determine how the firm behaves when formulating price and non-price strategies. For example, although included under
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