Industrial organization: understanding the mechanisms of market structures

Abstract

Industrial organization: understanding the mechanisms of market structures Patrick Legros, Professor of Econonmics at Université libre de Bruxelles, explores how Industrial Organization can help understand the positive and normative consequences of different market structures through three main topics: The OIO approach and reverse causality, market power enhancement: regulation and divestitures, and market power and the quiet life. He begins by analysing when and why do mergers or divestitures happen, and the degrees of integration varying within and across industries, even when controlling for exogenous differences. Professor Legros also looks to how can we explain the heterogeneity in performance among seemingly identical firms. Overall, he demonstrates that fringe firms can co-exist with powerful firms and that concentration increases with the market size, suggesting a demand-side driver of recent trends that profit margins and market concentration increase in many industries. Noting that stable oligopolies may lead to a market price that is inferior to the price in a perfectly competitive structure.