Classical and Neoclassical Elements in Industrial Organization
Industrial organization studies of pricing are examined, focusing on the formative debates of 1950-70. It is argued that most of these studies unknowingly adopted a mixture of classical and neoclassical theory, leading to three types of confusions. First, over what measure of profitability is equalized in competitive equilibrium. Second, over what period of time profitability differentials must be studied. Third, over the correct conclusions to be drawn for industry phenomena from firm studies of profitability. The paper concludes by questioning the practicability of a purely neoclassical theoretical grounding for industrial economists, since they abandon this approach in their empirical work.
Volume (Year): 16 (1990)
Issue (Month): 3 (Jul-Sep)
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