Competition law and policy aimed at preventing anticompetitive conduct and excessive market power, informed heavily by industrial-organization economics.

What is regulatory capture?

When a regulatory agency comes to serve the interests of the industry it regulates rather than the public.

Industrial Organization

Industrial organization studies how firms compete and how markets are structured — market power, pricing, entry, and the regulation and antitrust policy that govern them.

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Scope

The field (JEL category L) covers market structure and competition, oligopoly and strategic behaviour, pricing and product differentiation, regulation and antitrust, and the boundaries and organization of firms, using game theory and empirical analysis.

Sub-topics

Core questions

How does market structure affect competition and prices?
How do firms behave strategically?
What are the sources and effects of market power?
When and how should markets be regulated?
How do firms organize and set their boundaries?

Key concepts

Market structure
Market power
Entry barriers
Oligopoly
Price discrimination
Antitrust
Regulatory capture
Product differentiation

Key theories

Structure-conduct-performance: Bain linked market structure (e.g., entry barriers) to firm conduct and performance, the early empirical paradigm of IO.
Economic theory of regulation: Stigler argued regulation is often 'captured' by the industries it regulates, serving producer rather than public interests.
Game-theoretic IO: Tirole's synthesis recast industrial organization on rigorous game-theoretic foundations, the basis of the modern field.

History

IO grew from the Harvard structure-conduct-performance tradition (Bain) and the Chicago critique (Stigler) emphasizing efficiency and contestability. From the 1980s, the 'new IO' (Tirole) rebuilt the field on game theory, and empirical IO and the analysis of platforms and digital markets define its current frontier.

Debates

Does concentration harm welfare?: Structuralist concern about market power contends with Chicago-school views stressing efficiency and contestable markets.
Whose interest does regulation serve?: Public-interest justifications for regulation are challenged by capture theory.

Key figures

Joe Bain
George Stigler
Jean Tirole

Seminal works

bain-1956
stigler-1971
tirole-1988

Frequently asked questions

What is antitrust?: Competition law and policy aimed at preventing anticompetitive conduct and excessive market power, informed heavily by industrial-organization economics.
What is regulatory capture?: When a regulatory agency comes to serve the interests of the industry it regulates rather than the public.