Structure à Conduct à Performance

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StructureàConductàPerformance (traditional) The traditional structure-conduct-performance (S-C-P) paradigm is the broad theory that market structure (the number and relative sizes of firms in an industry) almost rigidly determines each firm’s conduct (output decisions and pricing behavior), which yields an industry’s overall performance (e.g., its profitability and efficiency from the vantage of society as a whole). This traditional approach became dominant following the work of Joan Robinson and Edwin Hastings Chamberlin in the 1930s, but slowly lost favor with theorists who viewed game theory as superior when analyzing the interactive and strategic behavior of such agents as nations or individuals or firms.

StructureàConductàPerformance (new). Foundations for the cutting edge of modern microeconomic theory include mechanism design theory, which is a more modern structureà conduct à performance paradigm that is intended to replace the traditional structureà conduct à performance paradigm.

Mechanism design theory is the process of modeling how differences in the information available to various potential transactors and differences in their incentives [structure] yields specific types of institutional mechanisms [conduct, in the form of, e.g., markets or structured negotiations or auctions ] with attendant stable or unstable equilibria and attendant efficiencies or inefficiencies [performance]. See also game theory.

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Author: Ralph Byrns

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