As a result of studying the topic, the student must: know
The main features of the leading schools and trends in the theory of industrial markets;
be able to
Use different approaches to the study of commodity markets and areas of production;
own
Methods of market analysis according to the Harvard paradigm.
What is the place of the theory of industrial markets among other economic sciences, what is its subject matter?
in European and American higher educational institutions this science has been taught for several decades. In the United States, this discipline is called industrial organization, In Great Britain - economics of industry or Analysis of industry & competition. What does the term mean industry?
In the American English Dictionary ( American dictionary of the English language) H. Webster's word industry translates as:
Second understanding of the term industry and corresponds to the subject of science and academic discipline"The Theory of Branch Markets".
The word "industry" has a broad and narrow meaning, the term industry applies equally to the automotive industry and, say, to the insurance market.
In a broad sense, industry is a human activity, understood as a craft and aimed at creating, transforming or moving economic goods. In a narrow sense, industry is the totality of its extractive and manufacturing industries.
In the phrase industrial organization word industry("industry") is used in a broad sense. The area of interest of the theory of industrial organization is the market of imperfect competition, i.e. the behavior of its participants, the possible result of their interaction, the impact on public welfare and government regulation.
In the preface of the Russian economist V. Galperin, written to the textbook of the Nobel Prize winner J. Tyrol "Markets and Market Power", the organization of industry is defined as applied microeconomics or as an application of microeconomics to the study of one side of the market - the supply side, where firms act as sellers.
According to Tyrol, the theory of industrial organization explores three groups of problems:
The author of the American textbook on the organization of industrial markets, L. M. B. Cabral, gives the following definition of the subject matter of the economics of industrial markets: "The organization of industrial markets studies the functioning of markets and industries, in particular the ways firms function with each other."
The study of market structures and mechanisms is the subject of microeconomics, therefore, some well-known scientists believe that there is no separate science "Industry markets", that this area of knowledge is just a section of microeconomics. Thus, the Nobel Prize winner (1982) J. Stipler in the first chapter of "Organization of Industry" writes: "Let's start this book with the greatest possible directness ... there is no such thing as an industrial organization. Training courses with this name are aimed at understanding the structure and behavior of industries (producers of goods and services) of the economy. These courses examine the distribution of firms by size, the reasons for such a distribution by size (primarily economies of scale), the impact of concentration on competition, the impact of competition on prices, investment, innovation, etc. But this is the content of economic theory, price theory , which ... is often called the unfortunate term “microeconomics” ”.
The difference between microeconomics and the theory of industrial markets is as follows.
Microeconomics
Theory of industrial markets
Thus, the theory of industrial markets is a relatively new applied direction in economics. It began to form, as will be shown below, in the 1930s–1940s and 1950s–1960s.
Economic science is often reproached for being isolated from reality, for being unable to predict and explain important phenomena in social life, to contribute to the solution of serious problems related to real processes taking place in society - economic crises increasing social inequality, rising unemployment.
The theory of industrial markets as a scientific direction of economic thought is, to a certain extent, a response to the remarks of critics that modern economic science rejects important research problems and has become a branch of social mathematics with an emasculated content. It does not just study the functioning of specific markets and the behavior of companies on them, but analyzes how the industrial, innovation, antimonopoly policy of the state can affect the effectiveness of the development of the industry market and the efficiency of interaction between companies, which will ultimately contribute to the growth of public welfare.
Let's bring the main tasks of the theory of branch markets.
Stages of formation of the theory of industrial markets as a science:
1) 1890s - early 1930s - studies of A. Marshall (1890), an English economist, the founder of the neoclassical trend in economics, and P. Sraffa (1926), an Italian and English economist who formulated important features of monopolies, their impact on the market and social welfare. Thus, according to these scientists, if the economy of scale of production of large companies is accompanied by a decrease in prices, then we can talk about the positive impact of monopoly behavior on consumer surplus. On the contrary, if the monopoly, having market power, reduces the volume of production and earns higher than normal profit, then it has a negative impact on social welfare.
Studies of monopole effects were also carried out at the end of the 19th and beginning of the 20th centuries. J. B. Clark, American economist, founder of the American school of marginalism, and C. Bullock, representative of the Harvard School of Economics. Clark (1887) analyzed the effect of company mergers on the level of monopoly in an industry; Bullock (1901) studied the effects associated with economies of scale within a monopoly;
2) 1930s - studies by E. Chamberlin and J. Robinson in the field of imperfect competition. In 1933, the book of the founder of the theory of monopolistic competition by the American economist
E. Chamberlin "The Theory of Monopolistic Competition", which made him famous. The Chamberlin model describes a market structure that combines elements of competition (a large number of firms in the market, relatively low barriers to entry) with elements of monopoly (the bargaining power of firms due to product differentiation).
In the same year, the work of the English economist, a representative of the Cambridge School in political economy, J. Robinson, "The Economic Theory of Imperfect Competition" appeared. She devoted her research to analyzing the behavior of large companies in a highly concentrated market. Robinson showed that a monopolist can segment the market of its product depending on the price elasticity of demand, set a special price for each segment and at the same time get the maximum profit - we are talking about price discrimination. Also, J. Robinson analyzed the positive and negative effects of price discrimination;
Summing up this paragraph, devoted to the description of the subject of the theory of industrial markets, we present the definitions of famous scientists who are recognized experts in this field:
Speaking about the subject of the theory of industrial markets, R. Coase makes two important remarks:
Thus, the remarks of Ronald Coase contain, in our opinion, two directions for further research in the field of the theory of industrial markets:
The history of the development of the economy of branch markets
As an independent section of economic theory, the economics of industrial markets was formed at the beginning of the second half of the 20th century, although interest in the economic behavior of firms and the development of industries arose much earlier.
In the development of the economy of sectoral markets, two main directions can be distinguished:
Empirical (observations of the development and real behavior of firms, generalization of practical experience);
Theoretical (construction of theoretical models of behavior of firms in market conditions).
In the history of development, the following stages can be distinguished.
I stage. The theory of market structures (1880-1910)
In the early 1880s. work came out William Jevons a ( William Jevons), which gave impetus to the development of the theoretical direction of the economy of sectoral markets and were devoted to the analysis of basic microeconomic models of the market (perfect competition, pure monopoly), the main purpose of which was to explain the effectiveness of the market mechanism and the inefficiency of monopolies. The impetus for the development of research in this direction in the United States was given by the formation of the first federal regulatory bodies and the adoption of antitrust laws. In addition to the work of Jevons, one can also highlight the work of Francis Edgeworth ( Francis Edgeworth) and Alfred Marshall ( Alfred Marshall).
Alfred Marshall laid the foundation for the technological concept of competition. Explaining the benefits of large-scale production, Marshall emphasizes the relationship between economies of scale and concentration of production.
The impetus for the development of applied empirical research on industrial markets was given by the work of John Clark ( John Clark), published at the beginning of the 20th century. By this time, in economic science, a static model of competition and monopoly is being formed and approved as two polar market conditions, so that between them, as it were, there are no intermediate states.
However, the studies carried out at this stage were based on too simplified models that do not correspond to reality, especially in terms of the behavior of oligopolistic firms in the market of differentiated products. Strengthening the processes of concentration of production in most sectors of the economy of developed countries and differentiation of products led to the transition to the second stage.
II stage. Market research with product differentiation (1920-1950)
Under the influence of changing business conditions in developed countries in 1920-1930 a new theoretical concept of market analysis appeared. In the 1920s works by Frank Knight are released ( Frank Knight) and Piero Sraffa ( Piero Sraffa). In the 1930s works by Harold Hotelling Harold Hotelling) and Edward Chamberlin ( Edward Chamberlin) dedicated to modeling markets with differentiated products.
One of the first works devoted to the analysis of oligopolistic markets were published in 1932-33. "The Theory of Monopolistic Competition" by Edward Chamberlin, "Economics of Imperfect Competition" by Joan Robinson ( Joan Robinson).
Joan Robinson clearly identified the scope of the analysis, giving a definition of the industry that continues to underlie the theory of the organization of markets, and she also recognized the diversity of the behavioral activity of firms. This is not only competition and monopoly, as previously thought, but also various other options for market power - competition between producers of a differentiated product and price discrimination. Since then, the idea has been affirmed that competition can exist even if firms have market power, which is what the term “imperfect competition” actually means.
Contribution Edward Chamberlin in the theory of imperfect competition lies, first of all, in the fact that he was the first to introduce the concept of “monopolistic competition” into economic theory. This was a challenge to traditional economics, according to which competition and monopoly are mutually exclusive concepts, and which offered to explain market prices either in terms of competition or in terms of monopoly. According to Chamberlin, the majority economic situations are phenomena that include both competition and monopoly. The Chamberlin model assumes a market structure that combines elements of competition (a large number of firms, their independence from each other, free access to the market) with elements of monopoly (buyers give a clear preference for a number of products for which they are willing to pay an increased price). Edward Chamberlin put the beginning of the study of competition as a process that is dynamic in nature. In such a system, both perfect competition and perfect monopoly turn out to be only moments of a single process of market development, “... in the entire price system, the forces of competition and monopoly are inextricably intertwined into a single fabric, differing in it only in their special patterns ...”.
A certain impetus to the development of research was also given by the Great Depression, which necessitated a reassessment of the actual role of competition in the operation of the market mechanism.
In 1930-1940. On the basis of the theoretical base formed by these works, empirical research is rapidly developing. Since that time, economic theory has gradually begun to affirm the position that there is a direct relationship between the level of concentration in the market (the number of sellers), the level of the market price and the amount of monopoly profit of each seller. So now the antimonopoly authorities have at their disposal a certain quantitative parameter that is convenient for conducting competition policy - the number of firms in the market. There is a mechanistic view of monopoly and competition in the market - the fewer firms operating in the market, the stronger their monopoly power - this is the logic that guides the implementation of antitrust policy. In particular, this criterion underlies the policy of allowing or prohibiting mergers and acquisitions adopted in the United States.
The firm's costs and profits
All-Russian classifier types of economic activity (OKVED)
OKVED was put into effect on January 1, 2003 and is designed to ensure the reliability of the reflection of the country's existing economic infrastructure and the possibility of international comparisons of the sectoral structure of the economy.
Simply put, OKVED is a collection of activity codes for entrepreneurs, where the code means the type of activity, the scope of production or the provision of services (Table 3.4). With his help:
The state determines the optimal size tax rate entrepreneur;
Collects and analyzes statistical information about each type of activity and types of enterprises;
More simply classifies the type of activity and “encrypts” data about it.
Table 3.4 - All-Russian classifier of types of economic activity
| Chapter | Name |
| Section A | Agriculture, hunting and forestry |
| Section B | Fishing, fish farming |
| Section C | Mining |
| Subsection CA | Extraction of fuel and energy minerals |
| Subsection CB | Extraction of minerals, except for fuel and energy |
| Section D | Manufacturing industries |
| Subsection DA | Manufacture of food products, including drinks, and tobacco |
| Subsection DB | Textile and clothing production |
| Subsection DC | Manufacture of leather, leather goods and footwear |
| Subsection DD | Wood processing and production of wood products |
| Subsection DE | Pulp and paper production; publishing and printing activities |
| Subsection DF | Production of coke, oil products and nuclear materials |
| Subsection DG | Chemical production |
| Subsection DH | Manufacture of rubber and plastic products |
| Subsection DI | Manufacture of other non-metallic mineral products |
| Subsection DJ | Metallurgical production and production of finished metal products |
| Subsection DK | Manufacture of machinery and equipment |
| Subsection DL | Production of electrical equipment, electronic and optical equipment |
| Subsection DM | Production of vehicles and equipment |
| Subsection DN | Other productions |
| Section E | Production and distribution of electricity, gas and water |
| Section F | Construction |
| Section G | Wholesale and retail trade; repair vehicles, motorcycles, household and personal items |
| Section H | Hotels and restaurants |
| Section I | Transport and communications |
| Section J | Financial activities |
| Section K | Operations with real estate, rental and provision of services |
| Section L | Public administration and ensuring military security; compulsory social security |
| Section M | Education |
| Section N | Health and Social Service Delivery |
| Section O | Provision of other communal, social and personal services |
| Section P | Provision of maintenance services household |
| Section Q | Activities of extraterritorial organizations |
The classification of an enterprise according to OKVED is not affected by either the form of its ownership (activity codes are the same for both individual entrepreneurs and LLC), nor the source of investment.
OKVED classifier includes almost all types of activities permitted on the territory of Russia. Therefore, there are many codes in the reference book, and for the convenience of classifying and using codes, a special structure has been developed that looks like this:
XX. - Class;
XX.X - subclass;
XX.XX - group;
XX.XX.X - subgroup;
XX.XX.XX - view.
However, it should be noted that the approach to the use of industry classifiers cannot be formal. Often goods - close substitutes are produced by enterprises belonging to different industries. (An example is the production of "consumer goods" by defense enterprises of the USSR.) Conversely, goods belonging to the same industrial group are intended for different consumer groups and have fundamentally different product boundaries. (The grouping “OKP code 025000” combines goods under the general name “Petroleum products”: gasoline, kerosene, diesel fuel, fuel oil, oils, etc.) Let us note once again that the industry groups enterprises according to the production principle, while the market - according to the generality consumer properties and demand.
Market classification
Depending on the purpose of economic analysis, the following types of markets are distinguished.
By objects of commercial transactions markets can be categorized as:
Markets for goods and services (coffee market, car market);
Factor markets, or resource markets (labor market, capital market, raw materials market);
Money and finance markets (stock market, bond market).
Commodity (product) markets operate with tangible (goods) and intangible (services) objects that are included in the final consumption of buyers. Resource markets arise where buyers purchase goods for later use in production (equipment markets, raw materials markets), which constitute an intermediate product for the economy as a whole, or for income generation (real estate market, including housing market). A special resource market is the labor market - an institution in which individuals offer their skills and qualifications as an object of sale. Financial markets regulate cash flows between economic agents both in the form of cash and in the form of other, more complex financial instruments - stocks, bonds, derivatives. financial instruments, shares, bank accounts, etc.
By the level of standardization of goods (services) markets are divided into:
To the markets of homogeneous goods;
Markets for differentiated goods.
Markets for a homogeneous product assume that consumers generally evaluate the types of products sold as having no fundamental differences from each other. As a rule, homogeneity occurs primarily where it comes to the physical properties of the goods. For example, standard exchange deliveries, many types of raw materials and minerals, agricultural crops can be assigned to homogeneous product groups. However, even if products in their form, characteristics or appearance(packaging) differ from each other, but consumers do not consider these differences significant and significant for themselves, then such products in economic sense will also be classified as homogeneous.
Markets for differentiated goods provide for the presence of special properties of products that make their varieties specific in the eyes of consumers. Therefore, there is no longer a single food market - it is now divided into many differentiated segments, each of which contains buyers loyal to “their” brand of goods. Examples of markets for differentiated goods are the many varieties of dairy products and yoghurts, chocolates, juices, as well as household appliances, clothing and hygiene products.
By buyer type markets include:
To the markets consumer goods;
Markets for industrial goods (means of production).
In the consumer goods markets, there are firms that supply their products to the individual consumer for final consumption. In the markets for industrial goods, both consumers and sellers are, as a rule, companies legal entities producing and acquiring goods for their subsequent participation in the production process.
By the presence and magnitude of barriers to entry allocate:
5 markets without entry barriers with an unlimited number of participants;
6 markets with moderate barriers to entry and a limited number of participants;
7 markets with high barriers to entry and few participants;
8 markets with blocked entry and a constant number of participants.
In those markets where there are no barriers to entry, there is complete mobility of resources. Capital and labor move freely between industries, and the number of market agents can change continuously: some firms enter the market, others exit the market. The higher the entry barriers, the fewer participants will be able to organize break-even production in the industry.
By degree of controllability market process on the part of the market participants themselves, markets subdivide
to organized markets;
Spontaneous (unorganized) markets.
In organized markets, there is a special mechanism for coordinating demand and supply from private agents. This is how numerous auctions, tenders, commodity and financial exchanges operate. All other markets are unorganized, where, apart from the state, there are no special institutions for comparing sales and purchases, the market price is formed gradually, over a long period. Individual market participants set prices and estimate optimal output volumes independently, outside of any private regulatory body.
By scale of operations participants among the markets are:
Local (local) markets;
Regional markets;
national markets;
international markets;
global markets.
Local markets operate on the smallest scale, within a district, city, region, or even one outlet on the ground. With a significant increase in the number of sellers and buyers, we can talk about the regional market. national market occurs when sales and purchases cover the entire country. If trade operations go beyond the boundaries of one country, there is international market. For example, it is possible to single out the European market, the North American market, the Asian market as an international one. When market participants cover the most diverse regions and continents with their actions, and their scale covers the entire planet, we are talking about a global market. Global markets primarily include many resource markets (oil and gas market, copper market, gold market), currency and financial markets, as well as some commodity markets (aircraft market, ship market)
Types of market structures are referred to a special type of market classification.
Types of Market Structures
Structure commodity market determines the behavior of the company, the nature of its interaction with other market participants. Traditionally, the main criterion for classifying the interaction of firms is degree of competition on the market. Usually isolated three broad categories of markets : a perfect competition market with a maximum degree of competitive interactions, a monopoly market with a minimum degree of competition, and an imperfect competition market, where competition is present, but its effect is distorted by the behavior of economic agents.
Perfect Competition
Perfect competition is defined by different authors in different ways. One of the most apt definitions was proposed by Joan Robinson: “Perfect competition prevails when the demand for each manufacturer's product is perfectly elastic. It follows from this, firstly, that the number of sellers is large and the volume of production of any of them is an insignificantly small fraction of the total output of this product; secondly, that all buyers are in the same position as regards the possibility of choosing between competing sellers, so that the market is dominated by the relations of perfect competition.
The model of perfect competition is characterized by some features.
The presence of a large number of economic agents: sellers and buyers. A large number means that even large buyers and producers represent volumes of supply and demand that are negligible on the scale of the market.
The product on the market is so homogeneous that none of the sellers can stand out with the special properties of their products, all units of the product in the mind of the buyer are exactly the same.
Free entry and exit from the market, that is, the absence of any barriers.
Perfect awareness of sellers and buyers about goods and prices, that is, market participants have perfect knowledge of all market parameters, since information is distributed instantly.
Competitive behavior provides that the market completely determines the parameters of the firm's behavior (the most important of them is price). The firm is entirely subject to the market, is price taker . The degree of influence of the firm on the market is minimal (or equal to zero). The interaction of firms-price takers gives the highest degree of competition. However, on the other hand, one cannot speak here in the strict sense of the interaction of firms, since firms passively respond to changes in the economic environment.
None of the sellers and buyers is able to influence the market price, since the share of each firm in the industry market is insignificant, so the demand curve D individual firm is horizontal (i.e., perfectly elastic). A perfect competitor can sell any number of products at a price P installed on the market. Wherein additional income MR, received from the sale of each additional unit of production, exactly corresponds to its market price (Fig. 3.2).
Rice. 3.2 - Demand for the products of a competitive firm
Advantages of perfect competition:
Perfect competition forces firms to produce at the lowest average cost. AC and sell it for a price corresponding to these costs. Graphically, this means that the average cost curve only touches the demand curve. If the cost of producing a unit of output were higher than the price ( AC > P), then any product would be economically unprofitable, and firms would be forced to leave this industry. If average costs were below the demand curve, and, accordingly, prices ( AC < P), this would mean that the average cost curve intersects the demand curve and a certain amount of production is formed that brings excess profits. An influx of new firms would wipe out those profits. Thus, the curves only touch each other, which creates a situation of long-term equilibrium.
Perfect competition helps distribute limited resources in such a way as to achieve the maximum satisfaction of needs. This is provided when P=MC. This provision means that firms will produce the maximum possible amount of output until the marginal cost of the resource is equal to the price for which it was bought. This achieves not only high resource allocation efficiency, but also maximum production efficiency.
The disadvantages of perfect competition include:
Perfect competition does not provide for the production of public goods, which, although they bring satisfaction to consumers, however, cannot be clearly divided, evaluated and sold to each consumer separately (by the piece). This applies to public goods such as fire safety, national defense, and so on.
Perfect competition, involving a huge number of firms, is not always able to provide the concentration of resources necessary to accelerate scientific and technological progress. This primarily concerns fundamental research(which, as a rule, are unprofitable), knowledge-intensive and capital-intensive industries.
Perfect competition contributes to the unification and standardization of products. It does not take full account of the wide range of consumer choices. Meanwhile, in modern society reached high level consumption, a variety of tastes develop. Consumers are increasingly considering not only the utilitarian purpose of a thing, but also pay attention to its design, the ability to adapt it to the individual characteristics of each person. All this is possible only under conditions of differentiation of products and services, which, however, is associated with an increase in production costs.
In practice, completely competitive markets are quite rare. These include the markets of some exchange goods, as well as the interaction of small firms in regional or local markets, markets for agricultural products (grain, potatoes, vegetables); currency market; world market of frozen fish; markets for precious metals (gold, silver, platinum).
Monopoly
Monopoly(from others - Greek μονο - one and πωλέω - I sell) - a type of industry market in which the only seller of a product that does not have close substitutes operates, independently exercising control over the price and output volumes, which allows you to receive monopoly profits. In a pure monopoly industry, as a rule, consists of one firm, that is, the concepts of "firm" and "industry" are the same. Pure monopoly usually arises where there are no real alternatives, there are no close substitutes, the product being manufactured is to a certain extent unique, and barriers to entry into the industry are high. This may be due to economies of scale (as in the automotive industry), natural monopoly (as the De Beers company monopolized the largest diamond markets in South Africa and controls the global diamond market).
stand out character traits monopoly.
9 Lack of perfect substitutes for the product. An enterprise-monopolist can produce homogeneous or differentiated products, but in any case, this product does not have a perfect, from the point of view of the buyer, substitute. The cross elasticity of demand between the monopolist's product and any other good is either zero or tends to zero. That is, a firm is a pure monopolist if it is the sole producer of an economic good that has no close substitutes (substitutes).
10 Lack of freedom to enter the market, that is, a monopolist can exist while other enterprises are not allowed to enter the market: the monopoly enterprise has a patent for products, technology, the existence of a government license, quotas, monopolist control over any production resource, significant savings on the scale of production, allowing only one supplier to be present on the market, etc. That is, the firm is shielded from direct competition by high entry barriers.
11 One seller is opposed by a large number of buyers.
12 In a monopoly, price exceeds marginal revenue. If, under conditions of perfect competition, the firm chooses only the volume of production (the price is set exogenously), then the monopolist can not only determine the volume of production, but also set the price. Therefore, the price exceeds the marginal revenue, that is P > MR. Monopoly equilibrium is observed where the marginal revenue from the sale of a good is equal to the marginal cost of its production: MR = MS. The monopoly does not set the price arbitrarily: the condition of equality of marginal indicators (additional indicators per unit of output) determines the volume of production and sales of the monopolist, and the market price is set depending on the elasticity of demand in this market (Fig. 3.3).
Rice. 3.3 - Demand and marginal revenue of a firm under pure monopoly
It is generally believed that monopoly prices are the highest. Indeed, they are usually higher than competitive ones, but it should be remembered that the monopolist seeks to maximize the total profit per unit of output. And, most importantly, the rise in prices is not unlimited, it is limited by the price elasticity of demand for the products of a given firm. It is also not entirely true that a monopolist always seeks to limit output. As an industry monopolizes, costs and demand change. Costs are affected by two directly opposite factors - lowering and increasing. Decreasing, since as a result of the creation of a monopoly, it is possible to more fully use the positive effect of increasing the scale of production (savings in fixed costs, centralization of supply and distribution, savings in marketing operations, etc.). On the other hand, there is also a tendency to increase them, associated with the swelling and bureaucratization of the administrative apparatus, the weakening of incentives for innovation and risk. This trend Harvey Leibenstein ( Harvey Leibenstein) denoted as X-inefficiency . According to Leibenstein, X-inefficiency occurs whenever the actual cost of any output is higher than the average total cost. Even with modern competition, X-inefficiency is possible, but such a situation is an exception to the rule, because such firms are doomed to death.
A pure monopoly market is also relatively rare in reality. However, monopoly effects in the form of a reduction in production and an increase in prices can occur in different industries as a temporary or rather long-term phenomenon.
Examples of a monopoly market: city-forming enterprise; the company that owns the patent for the innovation (“Microsoft”); prestigious consumer markets (“Rolex”, “Lamborghini”), “ALROSA” - diamond mining in Russia; "De Beers" - world diamond mining; "Eurocement Group" - cement market in Russia.
natural monopoly will be found where there are such characteristics of the market:
Positive economies of scale in long term, due to the technological reasons of the industry;
Large initial capital investments;
Insignificant marginal cost of production;
Unprofitable marginal (competitive) pricing.
Examples: electric power industry, pipeline transport, water utility, housing and communal services, railway transport, subway, gas industry.
Along with the monopoly on the part of the producers, there is a monopoly on the part of the buyer - monopsony . Such a buyer is interested and has the opportunity to buy goods at the lowest price (for example, the military industry). Much more often, the monopsonic advantage is realized in local markets.
Quasi-monopoly Markets are considered to be those in which, at a relatively low concentration of sellers, there is monopoly power.
Theory of industrial markets as a science
As an independent section of economic theory, the economics of industrial markets was formed at the beginning of the second half of the 20th century, although interest in the economic behavior of firms and the development of industries arose much earlier.
In the development of the economy of sectoral markets, two main directions can be distinguished:
Empirical (observations of the development and real behavior of firms, generalization of practical experience);
Theoretical (construction of theoretical models of behavior of firms in market conditions).
In the history of development, the following stages can be distinguished.
I stage. The theory of market structures (1880-1910)
In the early 1880s. the works of Jevons came out, which gave impetus to the development of the theoretical direction of the economy of industrial markets and were devoted to the analysis of basic microeconomic models of the market (perfect competition, pure monopoly), the main purpose of which was to explain the effectiveness of the market mechanism and the inefficiency of monopolies. The impetus for the development of research in this direction in the United States was given by the formation of the first federal regulatory bodies and the adoption of antitrust laws. In addition to the work of Jevons, one can also highlight the work of Edgeworth (Edgeworth) and Marshall (Marshall).
The impetus for the development of applied empirical research on industrial markets was given by the works of Clark (Clark), published at the beginning of the 20th century.
However, the studies carried out at this stage were based on too simplified models that do not correspond to reality, especially in terms of the behavior of oligopolistic firms in the market of differentiated products. Strengthening the processes of concentration of production in most sectors of the economy of developed countries and differentiation of products led to the transition to the second stage.
II stage. Market research with product differentiation (1920-1950)
Under the influence of changing business conditions in developed countries in 1920-1930, a new theoretical concept of market analysis appeared. In the 1920s published works by Knight and Sraffa. In the 1930s the work of Hotelling and Chamberlin on modeling markets with differentiated products.
One of the first works devoted to the analysis of oligopolistic markets were published in 1932-33. Chamberlin's Theory of Monopolistic Competition, Robinson's The Economics of Imperfect Competition, and Burle and Means' Modern Corporation and Private Property. These works formed the theoretical basis for the analysis of industry markets.
In 1930-1940. On the basis of the theoretical base formed by these works, empirical research is rapidly developing (Berle and Means, Allen and S. Florence, etc.).
A certain impetus to the development of research was also given by the Great Depression, which necessitated a reassessment of the actual role of competition in the operation of the market mechanism.
III stage. Systematic analysis of industry markets (1950 - present)
Within the framework of this stage, the economy of branch markets is being formed as an independent section of economic theory. In the 1950s E.S. Mason proposed the classic Structure-Behavior-Performance paradigm, later supplemented by Bain. In the mid 1950s. The first textbook on the economics of industrial markets is published.
In the 1960s theoretical studies by Lancaster and Marris appear.
Since the 1970s there is a growing interest in the economy of industry markets, caused by:
1) increased criticism of the effectiveness of state regulation, a move away from direct regulation towards the implementation of antimonopoly policy;
2) the development of international trade and the strengthening of the impact of the market structure on the terms of trade;
3) growing doubts about the adaptive capacity of firms in changing market conditions.
Since the 1970s there is an integration of game theory methods into the methodological apparatus of the economy of branch markets, there are studies devoted to the problems of cooperative agreements, information asymmetry and incomplete contracts.
Modern research in the economics of industry markets can be divided into two main areas that differ in the methodology used:
1) the Harvard school, based on a systematic analysis of industry markets using an empirical basis;
2) the Chicago school, based on a rigorous analysis of dependencies based on the construction of theoretical models.
LECTURE 1 and 2. THEORY OF INDUSTRY MARKETS: ORIGIN, DEVELOPMENT, RESEARCH METHODOLOGY
1.1. Object and subject of research of the theory of economics of branch markets
Traditionally, the concept of industry organization is considered as a synonym for industry economics, the theory of industry organization, the theory of industrial organization, the economics of industry markets. . main object theory of the economy of industrial markets is the study of the mechanism that leads production activities as closely as possible with the demand for goods and services.
In the economic literature it is possible with great difficulty to find an exact definition of the subject matter of the economics of branch markets. Many authors acknowledge that its boundaries are vague. The subject of the theory The economy of industrial markets is associated with a market approach, according to which consumers and producers act on the basis of price signals generated by supply and demand.
If we consider the current theory of the economy of industrial markets (ESM), then we can note its natural desire to ensure that the regulation of processes corresponds to some ideal ideas, i.e. purely subjective views of theorists. Here, many issues are the subject of microeconomic theory, such sections as the theory of markets, the theory of welfare.
Apart from commonality, ESM theory and microeconomics have significant differences in purpose and methodology.
1) Thus, both theories consider the type of organization of markets that links producers with consumers, but this connection itself depends on a large number variables.
2) The difference is that not all training courses in microeconomics significantly affect the problems of monopolistic competition and oligopoly.
3) Microeconomists are interested in the simplicity and rigor of the evidence base, trying to reduce assumptions and variables to a minimum of the most significant. ESM theorists are more inclined to explain the numerous quantitative and institutional details and their role, of course, without neglecting the possibilities of simplifying theories.
As research has shown, specialists in the theory of ESM should own three groups of methods to obtain successful results.
First, professional training in the theory of microeconomics, which ensures the formulation of strict relationships in the behavior of economic entities.
Secondly, the use of modern statistical methods to obtain data on the structure and functioning of the industry.
Thirdly, professional acquaintance with the methods and results of historical research on the flow of historical events, causal relationships of various bursts associated with deviations, economic and organizational innovations (taxation, customs regimes, benefits, etc.).
1.2. Problems of consistency and complexity of research
Consistency means the use of elements of the theory of large systems in ESM studies. In accordance with this theory, any system (including the system of the economy of branch markets) can be represented as a large system that allows its sequential decomposition (partition) into subsequent subsystems according to certain criteria and fairly homogeneous features, up to elementary subsystems (basic), performing target, basic, backbone functions in a large system.
Complexity research on the theory of ESM means the need for a comprehensive description of all the qualitative features of industry markets that characterize the markets themselves. However, this is an extremely complex problem, since it is associated with the need for a quantitative, fairly rigorous and representative description of the qualitative features themselves, their structuring and systematization, etc.
1.3. The initial paradigm "structure - behavior - performance"
There are two main approaches to the analysis of the organization of industrial markets. The first can be conditionally called a systematic approach. This is an approach based on the “Structure – conduct – performance” paradigm. The second approach is based on the use of microeconomic models and pricing theory (FIGURE).
The paradigm was developed by Harvard School professors E. Mason and D. Bain in the 40s and 50s. and was originally focused on empirical research. Mason, Bain, and their followers hypothesized that there is a direct relationship between market structure, firm behavior, and market performance. The object of research is the ability to predict the parameters of the market functioning after analyzing its structure of basic conditions and the behavior of firms.
Different versions of the systems approach offered different relationships between exogenous and endogenous parameters (variables) within the framework of the paradigm.
As the ideologues of the systems approach suggested in the mid-twentieth century, efficient functioning should automatically follow from a rational market structure and the behavior of firms that it determines. However, due to different reasons the market may be in crisis situation. Then the government can choose an intervention policy and try to improve the functioning of the market by applying policies that will affect both the structure of the market and the behavior of firms. Among the tools public policy government regulation can be identified.
The initial paradigm of the existence of efficient industrial markets comes from fundamental ideas about what the general right to expect from producers of goods and services to operate sustainably and efficiently. At the same time, the very concept of performance is quite multidimensional and includes the achievement of the following goals.
1. The decision on the expediency of producing certain products in the required volumes and using and using a certain technology (what, how much and how) should be effective from the standpoint of the economic expenditure of resources and meet the needs of the development of society.
2. The dynamics of productivity of the firm must be progressive, that is, accompanied by savings in factors of production while increasing output of higher quality products, reducing social costs and maintaining the growth of long-term income per capita.
3. The activities of producers should contribute to the full use of resources, especially labor.
4. The distribution of income should be socially fair, which ensures reasonable price stability, limiting the level of inflation, because, otherwise, social instability increases significantly.
1.4. Definition of the market and industry. Market boundaries.
Industry- a set of enterprises that produce products using the same type of technology and resources. Therefore, the industry sells goods that are close substitutes from the manufacturer's point of view.
Market- this is a set of conditions for the implementation of purchase and sale transactions; unites firms that produce goods that are close substitutes from the point of view of the consumer.
The presence of a close substitute (substitute) is determined by the value of the cross price elasticity of demand. If for goods from the nearest product groups the cross-price elasticity of demand is less than one, then these goods are not substitutes for this product. Therefore, the producers and sellers of this product can be considered as a separate market. J. Robinson and E. Chamberlin proposed to determine the market boundary in terms of cross elasticity of demand.
Another criterion is based on the correlation of commodity prices. The prices of goods sold in the same market can be correlated, since these goods are in the same conditions that determine the costs of production and the nature of demand.
There are also geographical boundaries of the market. So, it is possible to single out the market of a separate country, region.
1.5. Historical stages in the development of the theory
Most experts believe that the economy of industry markets began to take shape as a separate area economic research, in the 30s and 40s. 20th century During this period, the fundamental works of E. Mason were published, and a little later, the work of D. Bain.
Period 1930-1940s characterized by the development of research in the field of economics of industrial markets (economics of production) on the problems of oligopoly by Chamberlin, Robinson, statistical studies of concentration, costs and profits. A very important advance in theory was made in connection with the development of the theory of monopolistic competition by E. Chamberlin.
Period 1940-1950s was characterized by a significant growth and fundamental nature of work in the field of anti-competitive sources and the harm of monopoly domination. Stocking, Machlup, Bain.
1960s period characterized by the emergence of econometric studies of the structure and performance of the market in the works of Weiss, Scherer, Wilson.
1970s period was characterized by the main focus of research on the analysis of market share as the main indicator of dominance in the market, the scale of production, transaction costs. This period is called the golden age in theoretical research on the economics of industrial markets. The two main approaches mutually enriched and complemented each other. However, methodological balance at a new qualitative level has not been achieved. There is a growing debate about the place of theoretical and empirical analysis in the theory of industrial markets.
Three scientific schools attracted particular attention:
- "new theory" costs - results, modeling of strategic choices;
Chicago monopoly theory;
Theory of competitiveness.
1 school New theory of modeling strategic choices is to develop ideal theoretical models associated with dupoles.
2 school Chicago School of Analysis, minimizing the costs of monopolies, has received its greatest development. The product of its activity is the advancement of the following hypotheses.
1. Monopolies reflect the highest efficiency.
2. Costs of monopolies are generally used for monopoly profits.
3. The market with a dominant firm has minimal negative effects.
4. The merger is a pure form of market domination, which is quickly destroyed by the fraud of its participants.
These provisions did not find convincing evidence, but, nevertheless, they were widely used and served as a theoretical prerequisite for a sharp reduction in antitrust policy and the abandonment of government regulation of the economic sector.
3 school Theory of competitiveness(1975-1982), developed by one of the economic schools, is mainly associated with the entry of the company into the market, in which the internal structure of the market is secondary. Researchers believe that such a theoretical approach is more fundamental than the theory of competition, and has good grounds for widespread use.
This period is characterized by significant changes in the economy of industry markets, in the economic system and in the theory of market domination; the economy has become more competitive; many of the economists adopted the Chicago school. The economy of not only the United States, but also other countries, has become a testing ground for theoretical research and testing of a number of doctrines.
As a result, within about 35 years of Mason's pioneering work in 1939, research has developed in a logical sequence, using an informal theoretical framework to analyze the relationship between market structure, firm behavior, and market performance.
In subsequent periods, a combination of theoretical and empirical analysis is observed: the theory determines the object of analysis, reveals a range of structural and behavioral parameters, but the relationship between them is revealed in the process of empirical analysis.
In recent decades, three areas of research have been significantly developed in the economics of industry markets:
Application of game-theoretic models in the analysis of oligopolistic markets;
Using the theory of transaction costs in a comparative analysis of markets;
Development of the theory of competitive, or quasi-competitive, markets.
Any economic system in the course of its activity constantly faces and is forced to respond to three fundamental questions:
1. What produce and in what quantities?
2. How produce and at what cost?
3. For whom to produce and how to distribute the products produced?
There are various alternative methods for solving this group of problems. For example, if the organization of the economy is such that all issues are within the competence of the central government, then these three issues can be resolved through central planning. If state intervention is limited to the redistribution of income between different members of society and the implementation of social programs, and the rest of the questions are answered by the market, then with this approach, consumers and producers act in accordance with prices, profits and losses that are generated by the interaction of supply and demand in freely functioning markets. .
The modern market economy is the most complex economic organism, consisting of a huge number of various industrial, commercial, financial and other structures interacting on the basis of a system of business legal norms and united by a single concept - the market. The subject of the theory of branch markets is connected, first of all, with the market approach and consists in the study of the state of branches in industrially developed countries. economic systems. Most core courses consider manufacturing industries as industries due to their size and strategic importance in the economy.
It is possible to define subject theory of industrial markets given by Coase: the organization of industry is “a description of how economic activity is divided among firms. As you know, many firms carry out many different types of activities, while others have a very limited range of activities. Some firms are large, others are small. Some firms are vertically integrated, others are not. This is the organization of industry or, as it is usually called, the structure of industry.
From the name "Theory of industry markets" it follows that this science deals with the organization of individual industries and markets, studies the activities of firms in the industry, the impact of their decisions on the industry organization, the patterns of formation of various market structures, the principles of behavior of firms in various markets, the results of their behavior for the entire economy, options for sectoral policy of the state. The subject of analysis of the theory of industrial markets is shown in Figure 1.1. Of particular interest is the organization of industry in modern conditions in Russia and other countries.
Figure 1.1. – Subject of analysis “Theory of industrial markets”
To study the theory of industrial markets is to investigate the mechanism that brings production activities into harmony with the demand for goods and services. This organizing mechanism is the free market, and therefore the main object of the course is the study of the functioning of the market. The most important questions to be answered are the following:
How do market processes direct producers to meet consumer demand?
How do market processes bring markets to an equilibrium state?
Why and how can market processes be disrupted?
• how can they be adjusted so that the performance of the economy corresponds to the required representation?
In one way or another, the questions posed are the subject of microeconomics. However, despite the similarities, there is an important difference between microeconomics and industrial economics (the theory of industrial organization), both in purpose and in methodology.
As noted F.M. Scherer(36), both theories explain economic phenomena and consider a type of market organization that links producers to consumers, this link being an important variable. However, these theories differ mainly in the number of variables that are taken into account in the study of phenomena and explanation, as well as the applicability of predictions and explanations to specific situations in the real world.
The study of the problems of industrial organization is important for two reasons. Firstly, research in this area has a direct impact on the definition and implementation of public economic policy in areas such as the choice between private and public enterprises, the regulation and deregulation of public infrastructure sectors, maintaining competition through antitrust policy, stimulating technological progress, and much more. Secondly, in relation to many aspects of the functioning of real markets (markets of imperfect competition) in countries with a developed industrial market economy uncertainty remains. Therefore, further research in this direction, of course, is of practical importance.
Industry economics is based on the theory of the firm, the study of which precedes the analysis of industry markets. At the same time, the firm is mostly considered as a separate unit that makes a decision aimed at maximizing profit, i.e. nothing more than a "profit maximizing black box". Relationship between internal organization(managerial control, delegation and execution, etc.) and market strategy is taken as given.
