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

12. Thank you…..