MARKET SCP PARADIGM

MARKET SCP PARADIGM

1. MARKET SCP PARADIGM

2. SCP paradigm: The word ‘paradigm’ refers to a framework for analysis or a way of looking at a particular set of facts. The structure-conduct-performance paradigm provides a framework for the study of industrial organization. We can utilize this framework in managerial economics for examining the relationship between industrial structure and pricing.

3. Market structure: Refers to the organisation and dimension of the market. Evolved for the purpose of performing a function Manner of the operation Organisational characteristics Affects the trader’s behaviour and their performances.

4. Components of market structure: Concentration of market power Degree of product differentiation Conditions for entry of firms in market Flow of market information Degree of integration Dynamics of market structure

5. Dynamics of market structure: It refers to the conduct and performance of the market. Refers to the pattern of performance. Market performance: The degree of market performance is denoted by market efficiency. Efficiency = output/input

6. Types of market structure: Major types of market structure are of four: They are as follows, 1. Perfect competition(farmers market) 2. Monopoly(electricity) 3. Oligopoly( cement,seeds ) 4. Monopolistic(tooth paste, costemics )

7. A good market structure: Adjust to the changing environment Static market soon becomes obsolete Production pattern Demand pattern Technology change Crop pattern

8. Market conduct: Pricing policies of business firms are an important component of the firm’s conduct (their day-to-day behaviour ). ( i ) The number of buyers and sellers, (ii) The existence and degree of barriers to entry, (iii) The existence of economies of scale, and (iv) The degree of product differentiation.

9. Market performance: Market performance refer to the economic results that flow from the industry as aggregate of firms. Society is concerned with how an Industry performs in terms of its efficiency, its progressiveness, its, stability and the like. The dimensions are ( i ) the height of price relative to the average cost of production, (ii) the efficiency of production, (iii) The size of sales promotion costs relative to the cost of production,

10. Contd.. ( iv) the character of the product including choice of design, level of quality and variety of product with in any market and (v) The rate of progressiveness of the firms and industry in developing both product and techniques of production relative to evidently attainable rates and relative to the cost of production.

11. Evaluation of market performance: The market performance is evaluated with the estimation of Marketing Efficiency. The two approaches to market efficiency are, 1. Technical approach 2. Allocative or price approach The different methods used for calculating efficiency are, 1. Conventional method 2. Shepherd’s formula 3. Acharya’s approach

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