Introduction
Published online by Cambridge University Press: 21 September 2009
Summary
The chapters in this book all concentrate on the analysis of particular markets or critically evaluate policy measures taken in the US or Europe to promote market competition. In that sense they are ‘applied’. Yet, they are also ‘theoretical’ in that they elaborate or test theories about the functioning of markets. The chosen contributions follow a partial equilibrium methodology, recognizing ‘the fact that a few relationships are usually dominant with respect to the prices and outputs of particular goods’ as emphasized by Stigler in the last chapter of his Theory of Price (where he explains why he neglected the theory of general equilibrium).
Consider the UK market for salt. The main questions to be answered are the following. Why are there just two producers of salt in the UK, not more nor less? In what precise sense can one say that there is room, today, in that market for just two producers, so that entry of new firms would not be expected? Is this to say that there exist ‘barriers’ to entry? Knowing that there were many producers of salt at the beginning of the century, why did they disappear and how? Why did some producers give up and close down while others merged with competitors?
But then, why didn't the remaining two producers of salt merge to enjoy a monopoly position? Intuition suggests that they could cash in on monopoly profits by colluding.
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- Applied Industrial Economics , pp. 1 - 30Publisher: Cambridge University PressPrint publication year: 1998