The effect of industry organization upon performance : A case study : The production of primary aluminum
Coward, Harold Autrey, Jr.
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The familiar problem of social losses due to monopolization of an industry is addressed with the unfamiliar addition of a recognition that production costs may not be independent of industry structure. The study is specifically focused on the domestic primary aluminum industry. A linear-programming process model of aluminum production is used to analyze the production cost effects of certain sub-optimal institutional arrangements in the industry thought to reflect government intervention. Decontrol results in production cost savings, but any such savings are found to be vastly outweighed by usual monopoly losses unless output price is regulated.