Introduction

The perfectly competitive model assumes a large number of buyers and sellers, each of which is a price taker. Moreover, entry into and exit from a perfectly competitive industry are assumed to be costless. Introductory microeconomics courses typically spend a considerable amount of time analyzing perfectly competitive firms and industries. The monopoly model assumes the opposite: one seller with complete control over price in an industry with insurmountable barriers to entry. The evolution of industrial organization into a major area of economics has also been closely linked to the development of the modern theory of the firm. Industrial organization courses tilt the balance in the opposite direction, emphasizing an accurate depiction of the real world. The structure-conduct-performance (SCP) industrial organization paradigm, however, was primarily empirical in its orientation. The SCP paradigm was developed by Edward Mason and Joe Bain in the 1940s and 1950s. The chapter also presents an overview of the key concepts discussed in this book.