Empirical Measurement in Market Structure Research

Abstract

EMPIRICAL research in the field of industrial organization is not new to agricultural economists. The pioneering works of Hoffman and Nicholls are included in any bibliography of significant studies in this area. But until recently, market structure research was almost completely neglected for over a decade. Many things contributed to this neglect. Among them were: the coming of World War II which changed the nature of problems considered relevant by researchers; the initial emphasis on operational efficiency in research sponsored by the Marketing Act of 1946; the barriers to obtaining empirical data; the greater attractiveness of new and sophisticated theoretical tools more applicable in other areas; and the inherent controversial character of much of the research in industrial organization. Combined, these factors led to the virtual abandonment of significant empirical studies in this area by agricultural economists for over a decade. But things have changed, almost over night. Much of the renewed interest has been virtually thrust upon the profession. The most prominent marketing problems of the 1950's, as viewed by many farmers, their cooperatives, food processors, distributors, and public officials were matters of market power and bargaining, price discrimination and predatory practices, vertical integration and contract farming. These problems generally did not lend themselves to analysis by the tools most familiar to marketing economists, especially those techniques appropriate for demand analysis, plant operational efficiency, and, more recently, operations research. Not surprisingly, therefore, many economists turned to market structure theory to learn what it had to offer. I fear that for many this new interest will turn out to be just another fad. Therefore, I want to express my convictions as to why research in this area is of paramount importance today. Public policy in a free enterprise economy is concerned with insuring that industries perform in a socially desirable manner. This end may be achieved through either indirect or direct intervention into the affairs of business. The indirect approach attempts to maintain, encourage, or create an industrial environment in which firms, and those responsible for business