This paper traces the time series (Growth of Firms) tradition in the study of market structure, and looks at how recent studies on entry and the size distribution of firms have modified thinking in this area.

The paper provides an informal introduction to some of the main themes of the recent literature on "non-cooperative" or "sequential" bargaining models. It focuses in particular on the relationship between the new approach and the traditional axiomatic approach exemplified by "Nash bargaining theory" It illustrates the new insights offered by the non-cooperative approach, by reference to a detailed analysis of the manner in which the presence of an outside option available to one of the parties will affect the negotiated outcome. Finally, the difficulties which arise in extending this analysis to two-person bargaining with incomplete information, and to n-person bargaining, are discussed. This is a revised version of the fourth Review of Economic Studies Lecture presented in April 1985 at the joint meeting of the Association of University Teachers of Economics and the Royal Economic Society held in Oxford. The choice of lecturer is made by a panel whose members are currently Professors Hahn, Mirrlees and Nobay, and the paper is refereed in the usual way.

Considerable attention has been devoted in recent years to the study of markets which are quasi-competitive in the sense that they retain the notion of a large number of firms selling a homogeneous product, but depart from perfect competition in relaxing the assumption that consumers are perfectly informed as to the prices of the various firms. The initial surge of interest in this type of model was motivated by the need, first noted by Arrow (1956), to deal with the firm, even in a competitive environment, as a price setter, in order adequately to tackle the analysis of disequilibrium behaviour. Thus early work in the field, beginning with Fisher ((1970), (1972), (1973)) focussed on the question of whether an initial market distribution of prices would, over time, converge to a unique equilibrium price. More recent work has, however, developed the idea that market equilibrium might be characterized by a persistent distribution of prices. That this is more reasonable in the light of the variety and volatility of prices (which is) the commonplace of our experience was argued by Rothschild (1973). A further, and theoretically more compelling, reason for exploring this question, however, is provided by what is probably the most striking aspect of the literature on these markets: the fact that for a very wide range of apparently quite reasonable assumptions, the distribution of prices converges to the monopoly price (Diamond (1971), Hey (1974)). Indeed, where prices do converge, they converge to the competitive price only under very strong conditions: for example, where firms are artificially constrained to behave as if they were perfect competitors (Fisher, Rothschild, op. cit.). Thus it would seem that in order to tackle the question of whether, under conditions of imperfect price information, any competitive features of the market may be preserved, we are compelled to examine market equilibria of this more general class. Such price dispersion as is empirically observed in many markets undoubtedly owes its origin to a wide range of contributory factors. This suggests representing the firm as experiencing a succession of exogenous random shocks, as in Lucas and Prescott (1974). An alternative approach is to explore the possibility that firms set a range of suboptimal prices via their various estimates of actual demand conditions, as deduced by following an optimal estimation procedure (stopping rule), as explored by Rothschild (1974). More germane to our present concerns as to whether the range of actual prices, or their average, might be drawn by competitive pressures below the monopoly price, is the more recent work which begins from the notion that consumers differ in their costs of acquiring information, so that firms partition themselves permanently into subgroups patronized predominantly by different mixtures of consumer types; the better informed consumers being associated, as it were, with the lower price firms . (Salop and Stiglitz (1978), Axell (1977).) The present model adopts a rather different type of approach; we aim to model equilibrium in the quasi-competitive economy as an ongoing process, in which firms continually compete with each other to increase their respective sales to a number of identical customers.

The measure of the capital intensity of an industry used below is the quotient of the value of gross capital stock and the total annual wages and salaries bill.2 The United Kingdom input-output tables for 1968 are available in a highly disaggregated form and provide the wages and salaries bill for each industry, but the Blue Book estimates of gross capital stock are available only in a much more highly aggregated form. By combining the two sources, comparable figures were obtained for a 17-industry classification. The industries were: Agriculture, Extractive Industries, Food and Drink, Chemicals, Iron and Steel, Engineering, Clothing, Pottery, etc., Timber, Paper, etc., Construction, Gas, Electricity, Water Supply, Transport, Communication, and Distribution and Services. The government sector, insofar as it constitutes public administration financed by tax revenue, is excluded.

A new 45-industry, 23-year, dataset for Japan is used to investigate the duration of industry leadership. A new scaling relationship linking a firm's current market share with the standard deviation of market share changes is reported. This relationship discriminates in a powerful way between rival candidate theoretical models of market share dynamics. It also makes possible a useful simplification in testing a benchmark model of a Markovian kind. Relative to that model, it is found that at least some industries display a “Chandlerian” bias toward longer durations of leadership than would be present in the benchmark model. (JEL D43, L13)

Este trabajo analiza la duración del liderazgo en la industria tomando como base las cuotas de mercado de las empresas líderes en 45 industrias japonesas a lo largo de 23 años. Para ello, se propone una nueva relación escalar entre la cuota de mercado de una empresa y la desviación estándar de los cambios en dicha cuota de mercado. Esta relación discrimina de forma poderosa entre los modelos teóricos candidatos de la dinámica de participación en el mercado. También hace posible una simplificación útil a la hora de contrastar un modelo de tipo markoviano. En relación a este modelo se halla que al menos algunas industrias muestran un sesgo “chandleriano” hacia duraciones más largas del liderazgo que la representada en el modelo de referencia.

The notion of a Perfect Equilibrium in a multi-stage game is used to characterize industry equilibrium under Monopolistic Competition, where products are differentiated by quality.

Slayton and Treblicock (1978)), the formal analysis of the economics of the self-regulating profession has received little attention from theorists. If a profession is self-regulating, in the sense that its current members, being the sole suppliers of a certain type of service, are free to determine, in one way or another, whether or not to admit a potential recruit, then it might seem prima facie that such a profession could simply be regarded as a monopolistic seller of the service in question, so that the effects of self-regulation would appear to involve an unambiguous welfare loss. The whole rationale for self-regulation, however, rests on the notion that it provides a vehicle through which the quality of the service may be maintained in markets where the consumer cannot readily measure this quality himself. It is the analysis of the interplay of these two elements, the enhanced price of such services associated with the monopolistic power of the profession, and the improved quality of the service which may accompany a reduction in supply, which forms the focus of the present paper. It is tempting to begin the analysis of such a profession by first positing some particular