1.2.1 The New Industrial Organization...
By the late 1970s it was clear that the extensive statistical analysis carried out within the framework of SCP was yielding diminishing returns. There was not a consensus regarding the empirical significance or even the existence of empirical regularities from market structure to market performance. Furthermore, even if such regularities could be established, there was considerable debate over the meaning. For instance, did increases in market concentration increase market power and profits? Or were both higher profits and greater firm size. leading to an increase in seller concentration, due to efficiency advantages? At the same time an upsurge of interest occurred in the application of game theory to economics in general and to industrial organization in particular. Out of this environment was born a set of ideas known loosely as the new industrial organization. Key distinguishing features of the new industrial organization are as follows:
-The emphasis is on specific industries.
-The focus is on developing models of firm behavior
-Empirical work is based on well-founded models of firm behavior.