An analysis of the structure-conduct relationship of firms in a selected retail market
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Abstract
The purpose of this in depth study is to ascertain how satisfactorily the received economic doctrine explains the structure-conduct relationship in a selected household consumer durable market with respect to specific decision variables of competitive strategy. The decision variables under consideration are store location, competitive goals, advertising, pricing policy, price discrimination, and product-line strategy. The procedure and technique used in the analysis consists of movement from the theoretical to the empirical areas of research. The literature available in scholarly journals, reference works, and textbooks was searched to gain an insight into the state of the science with respect to explaining firm behavior in the market place. Data concerning firm behavior in the market were obtained by repeated visits to the market between November 1965 and February 1967. In addition to repeated visits with dealers in the market to clarify and validate data obtained in interviews, discussions with dealers from other markets, distributor salesmen, and advertising executives were also utilized for this purpose. The major empirical phase of the study consisted of personal interviews during the summer of 1965 with thirty-seven of the thirty-eight dealers selling home appliances in the narket under study. A pseudonym is used to refer to the market City to fulfill the guarantee of anonymity given to persons who furnished data for the study. This technique was employed so that a greater quantity of more accurate information would be available for analysis. After all empirical data were gathered, they were put on cards and used as input for summarization by computer. The six relevant decision variables were then tested individually by comparing data obtained through personal interviews with various hypotheses in economic literature. A judgement was then made as to how well the economic literature explained the structure-conduct relationship for each decision variable. Only two of eight hypotheses presented in the review of the literature on location were rejected as inapplicable in the market under study. The judgement was made that the economic literature satisfactorily explains the structure-conduct relationship with respect to store location as competitive strategy. Only three of ten hypotheses presented in the review of the literature on competitive goals were rejected as inapplicable in the market under analysis. The judgement was made that the economic literature satisfactorily explains the structure-conduct relationship with respect to competitive goals in the market. Two of ten hypotheses presented in tile review of the literature on pricing practices were rejected as inapplicable in the market under examination. The conclusion was that the economic literature satisfactorily explains the structure-conduct relationship with respect to pricing practices in the market. Only three of thirteen hypotheses presented in the review of the literature on advertising practices were rejected as inapplicable in the market under study. The judgement was made that economic literature satisfactorily explains the structure-conduct relationship with respect to advertising practices in the market. None of the twelve hypotheses presented in the review of the literature on price discrimination were rejected as inapplicable in the market. The conclusion was that the economic literature satisfactorily explains the structure-conduct relationship with respect to price discrimination in the market. Three of eleven hypotheses presented in the review of the literature on product-lines were rejected as inapplicable in the market. The decision was made that the economic literature satisfactorily explains the structure-conduct relationship with respect to product-line strategy in the market. Economic theory for the most part correctly explains the structure-conduct relationship in tho market for all six decision variables. Therefore, the working hypothesis of the whole study was accepted and the conclusion made that received economic doctrine eclectically applied adequately and satisfactorily explains the structure-conduct relationship in a selected retail consumer durable market with respect to the six decision variables.