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New Developments in the Analysis of Market Structure pp 55–89Cite as

Palgrave Macmillan

Strategic Competition and the Persistence of Dominant Firms: a Survey

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Part of the book series: International Economic Association Series ((volume 77))

Abstract

In the struggle to create, maintain and expand favourable market positions, firms’ actions are intended not only to affect the current conduct of rivals directly, but also to have an indirect effect by altering market structure in a way which constrains the rival’s subsequent actions. In this dynamic process, market strategies or conduct (the control variables) interact with market structure (the state variable); and current conduct can become embedded in future market structure through strategic investments made by firms to bar entry and reduce intra-industry mobility. (For an analysis of this view of industry dynamics, see Jacquemin, 1972; Caves, 1976, Part I; Caves and Porter, 1977; Spence 1981a, p. 51; and Stiglitz, 1981, p. 187). Of course, not all investments made by firms have the intended effect on market structure, and the purpose of this survey is to consider a recent body of literature which has devoted itself to precisely this point.1 This work is of interest because of the new light it has shed on the combined structural and strategic origin of market power; that is, on the hoary question of the persistence and profitability of dominant firms (compare Posner, 1972, p. 130 with Williamson, 1975, p. 218 for contributions to this old debate). The literature seems to have coalesced around two basic types of model.

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Authors and Affiliations

  1. University Of Paris, I, France

    David Encaoua

  2. University Of Southampton, UK

    Paul Geroski

  3. Catholic University Of Louvain, Belgium

    Paul Geroski & Alexis Jacquemin

Authors
  1. David Encaoua
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  2. Paul Geroski
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  3. Alexis Jacquemin
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Joseph E. Stiglitz G. Frank Mathewson

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© 1986 International Economic Association

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Encaoua, D., Geroski, P., Jacquemin, A. (1986). Strategic Competition and the Persistence of Dominant Firms: a Survey. In: Stiglitz, J.E., Mathewson, G.F. (eds) New Developments in the Analysis of Market Structure. International Economic Association Series, vol 77. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-18058-5_2

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