CAHomework1_2 - Homework I Part II Professor: Andrea...

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Homework I Part II Professor: Andrea Stocchetti STRUCTURE-CONDUCT-PERFORMANCE MODEL The structure-conduct-performance (SCP) paradigm was devised over half a century ago in an effort to contextualize and explain industry dynamics. SCP is a model used to link elements of market structure to business conduct and performance in industrial economics. The whole five-force framework of Porter is based on the SCP model: the structure of an industry determines organizations’ competitive behavior (conduct), which in turn determines their profitability (performance). In concentrated industries, according to this model, organizations would be expected to compete less fiercely, and make higher profits, than in fragmented ones. However, as Haberberg and Rieple (2001) state, the histories and cultures of the firms in the industry also play a very important role in shaping competitive behavior, and the predictions of the SCP model need to be modified accordingly. 1
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Homework I Part II Professor: Andrea Stocchetti Market performance describes the success of a market in producing benefits (social performance) for consumers and so the more market price is getting closer to marginal cost, the better the marketing is performing. Two different measures have been provided: rate of return, referring to economic profit; price- cost margin, the difference between price and marginal cost. Market structure refers to those factors which determine the competitiveness of a market. A variety of structural factors have been proposed, among which the following ones should be mentioned: Measure of Industry Concentration: four-firm concentration ratio (called C4) represents the share of
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CAHomework1_2 - Homework I Part II Professor: Andrea...

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