Introduction

This chapter introduces the foundations of industrial organization, tracing its historical development through three major schools of thought: the Harvard School, the Chicago School, and the New Industrial Economy. Each tradition contributed different perspectives on market functioning, competition, and the role of firms in shaping outcomes. The Harvard School emphasized market structure and regulation, while the Chicago School defended efficiency and the self-regulating capacity of markets. The New Industrial Economy incorporated strategic behavior and game theory, enriching the analysis of imperfect competition. The chapter also explains the model of perfect competition, exploring its assumptions, the conditions under which firms maximize profits, and its implications for efficiency and social welfare. While perfect competition serves as a theoretical benchmark, the chapter highlights its limitations in explaining real-world markets. The introduction closes with a set of key questions and exercises that reinforce understanding and encourage critical thinking about the relationship between market structures, firm strategies, and policy interventions. By the end, students acquire a comprehensive overview of the historical and analytical tools that frame the study of industrial organization, preparing them for a deeper exploration of imperfect markets and regulatory frameworks.