INDUSTRIAL ORGANIZATION: PRICE MODELS AND PUBLIC POLICY.

The article discusses price models and public policy in industrial organization. The author states that elementary structural approaches in antitrust policy have been predicated principally on two grounds, a need to slow or reverse an assumed rapidly increasing trend or high level of concentration and a purported relationship between an increase in concentration and a lessening of competition. There exists considerable doubt whether there has been any rapidly increasing trend of concentration. The purported relationship between concentration and competition appears to rest on a weak association between profit rates of leading firms and concentration ratios for a limited number of industries. A simple correlation between one structure element such as a concentration ratio and a performance variable such as a profit rate will not provide a critical link or easy formula for antitrust policy. Terms structure and performance may be convenient for organizing data, but unlike economic models they offer no analytical content in and of themselves. An approach, which examines in detail the nature of competition in specific industries gives a greater opportunity for appreciating among variables and is more likely to bring one closer to an understanding of foundations of enterprise in the U.S.