Thus conduct takes on a pivotal role in the analysis of markets since to a large extent it
determines how well the firm performs and it also impacts upon market structure (see
Figure 7.2 later). The same line of argument can be applied to performance factors. Rather
than being the passive result of the initial market structure and conduct, performance factors
such as profitability impact upon both structure and conduct. High profitability will
encourage new entry and thus influence the structure of the market/industry. Similarly,