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- Title
Market Structure And Multiproduct Industries.
- Authors
Bailey, Elizabeth E.; Friedlaender, Ann F.
- Abstract
TRADITIONAL ECONOMIC ANALYSIS of the theory of the firm has concentrated on single-product firms. But, in reality, most businesses produce many products, and many regulatory and antitrust issues involve only these enterprises. In recent years, economists and policymakers dealing with antitrust and regulatory issues have increasingly recognized the need for a theory that can be used to evaluate the efficiency of market structures in industries dominated by a few firms operating in a diverse range of markets. For such firms, conventional concepts of structure and performance such as economies of scale, measures of concentration, and barriers to entry do not adequately capture the complexity of market relationships. While these represent only a small fraction of the regulatory and antitrust issues that have headed the policy agenda of regulatory agencies, the Justice Department and Congress over the past decade, they should indicate the importance to economists of learning to understand why firms come to have the scale and product composition that they do, how the market operates in the typical multiproduct context, and the welfare and regulatory implications of such firm and market behavior. The complexity of these behavioral relationships should indicate that simple notions of efficiency related to the scale of output are insufficiently powerful to be generally relevant, and that the composition of output is as important as its scale in determining costs. To enhance the process of dissemination, therefore, we undertake in this paper to summarize and interpret the new theoretical tools and concepts, to show how these provide a way of thinking about important industrial organization issues with precision, and to discuss their empirical implementation and relevance for policy.
- Subjects
MULTIPRODUCT firms; DIVERSIFICATION in industry; INDUSTRIAL organization (Economic theory); INDUSTRIAL efficiency; ECONOMIC structure; MARKETS; ECONOMIES of scale
- Publication
Journal of Economic Literature, 1982, Vol 20, Issue 3, p1024
- ISSN
0022-0515
- Publication type
Article