Review of Industrial Organization

, Volume 7, Issue 1, pp 83–90 | Cite as

Industry performance indices and the economics of information: New perspectives and caveats

  • Michael R. Baye
  • Dennis W. Jansen
Article
  • 38 Downloads

Abstract

Industry indices, be they conduct or performance based, frequently guide government intervention activities and are used for both predictive and prescriptive purposes. Unfortunately, few existing indices of industrial concentration are based on underlying economic theory, and those that are based on theory are based on models of perfect information. We derive a general performance measure relevant for industries that experience imperfect information. We do so by specifying a social welfare function that reflects the objectives of the policymaker and maps characteristics of industry equilibria under uncertainty into a real number that summarizes industry performance. The importance of explicitly accounting for the information structure of an industry is illustrated by deriving a reduced form for the performance measure valid when a monopolist faces random demand.

Key words

Concentration performance index information uncertainty 

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Copyright information

© Kluwer Academic Publishers 1992

Authors and Affiliations

  • Michael R. Baye
    • 1
  • Dennis W. Jansen
    • 2
  1. 1.Department of EconomicsPennsylvania State UniversityUniversity ParkU.S.A.
  2. 2.Department of EconomicsTexas A&M University, and Indiana UniversityBloomingtonU.S.A.

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