Unperfect Performance

Performance

References

Clarke, R. (1985). Industrial Economics, Basil Blackwell: Oxford, Chapter 5.

Douglas, E.J. (1992) Managerial Economics, Prentice-Hall International Editions.

Devine, P.J., Lee, N., Jones, R.M. and Tyson, W.J. (1985). Introduction to Industrial Economics, George Allen and Unwin: London, Chapter 8.

Lipczinski, J. Wilson, J. and Goddard, J. (2005). Industrial Organization, Harlow: Pearson Education Ltd., Chapter 9.

Strak, J. and Morgan W. (eds) (1995). The UK Food and Drink Industry: A Sector by Sector Economic and Statistical Analysis, Euro PA and Associates: Northborough, Cambs.

Having attended this lecture and read the above references, students should understand the meaning of the following terms:

• Definition of performance

• Measurements of profitability

• Breakeven analysis doctrine

• Market concentration doctrine

• UK evidence of the Market Concentration doctrine

Students should now know and understand the SCP framework and recognise its relevance in the analysis of an industry or market.

Performance

Performance: less clear-cut than 'structure' and 'conduct': its level needs to be specified:

1. Market level performance - concerned with economic efficiency within the economy: benefits (i.e., jobs) and costs (i.e., pollution).

2. Firm level performance - concerned with how well a firm has satisfied its objectives.

These do not necessarily coincide, except in perfect competition (where social MC=P).

There are no universal performance criteria but there are 3 common measures:

1. Price – average total cost ie P-ATC (which must bring an adequate return on capital).

This is a measure of profitability; it can be subdivided into three:

(i) Profits relative to sales. This discriminates against businesses with high turnovers and low margins. Supermarkets and large retailers perform relatively badly using this measure.

(ii) Profits relative to assets. Banks, property...