The Industrial Organization Model This model, pioneered by Edward.H. Mason and Joe. Bain, provides a...
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Transcript of The Industrial Organization Model This model, pioneered by Edward.H. Mason and Joe. Bain, provides a...
The Industrial Organization Model
This model, pioneered by Edward.H.Mason and Joe. Bain, provides a useful
conceptual framework for analyzingthe structure of real world markets.
For example, suppose we want to compare the structure of the pharmaceutical industry to the farm equipment industry. The industrial organization model gives us the tools to carry out this task.
Market Structure
Market Conduct
Market Performance
Government Policy
The I. O. Model
Number and size distribution of sellers
Number and size distribution of buyers
Degree of product homogeneity or heterogeneity
Importance of economies of scale
Barriers to entry
•Pricing strategies
•Product development strategies
•Advertising and promotion strategies
•Means of coordination and cross-adaptation of price, product, and sales promotion policies among competing sellers
•Legal tactics
Relationship between price and marginal cost (Allocative efficiency)
Technical efficiency
Dynamic efficiency
X-inefficiency
Recall this market type fromprinciples of micro•Large number of buyers
•Large number of sellers
•Homogeneous product
•Potential entrants suffer no disadvantages vis à vis established sellers
By contrast, the market for desktop operating software is a far cry from perfect competition. Microsoft dominates this market segment.