Rev Ind Organ (2012) 40:85–86
Introduction: Market Structure and Efﬁciency
Victor J. Tremblay
Published online: 25 January 2012
© Springer Science+Business Media, LLC. 2012
Identifying the relationship between market structure and efﬁciency has been a central
theme in industrial organization. Early followers of the structure-conduct-performance
tradition tried to uncover a clear link between market structure and economic perfor-
mance. Unfortunately, decades of empirical and theoretical research has established
that there is not a consistent and unambiguous mapping from structure to performance.
Although empirical studies generally ﬁnd a positive relationship between industry
concentration and profitability, the relationship is weak statistically. In addition, game
theoretic models show that there are situations under which monopoly and imperfectly
competitive markets behave efﬁciently. Context matters in that industry characteris-
tics, as well as market structure, inﬂuence performance. This motivated a resurgence
in case studies of individual industries in place of the inter-industry studies that were
done in the past.
This series brings together papers that address estimation issues and investigate the
relationship between market structure and efﬁciency from the perspective that industry
characteristics matter. The primary focus is on static efﬁciency or market power.
In the ﬁrst paper, Stephen Martin provides a description of the theoretical issues
and a survey of evidence regarding the effect of market structure on efﬁciency
for eight industries. The evidence shows that industry-speciﬁc factors interact with
market structure to inﬂuence efﬁciency. For example, he explains how efﬁciency
depends upon learning by doing in the aircraft industry, the degree of public accep-
tance of cartel behavior in the liner shipping industry, and the vertical structure of
ﬁrms in the retail gas industry.
See Schmalensee (1989) for a survey of early studies and the evidence.
V. J. Tremblay (
Department of Economics, Oregon State University, 303 Ballard Extension Hall,
Corvallis, OR 97331-3612, USA