3 questions in IO 3. How does the behavior of firms influence the structure or organization of markets and the performance of markets? The emphasis of the previous question was on the effect of market structure on the conduct of firms. The emphasis here is on adopting a more dynamic perspective and recognizing the possibility of feedback effects from firm conduct to market structure. We might expect that strategies which firms adopt today are intended to change market structure and thus firm behavior tomorrow. It would seem in fact that many aspects of non-price competition such as research and development, are specifically designed to alert market structure tomorrow. Clearly, the extent of product differentiation is not determined only by exogenous factors such as the preferences of consumers. Firms have some latitude to choose the characteristics, range variety, and quality of products they sell TWo issues that have received a great deal of attention are The potential strategies firms can adopt to drive competitors out of business in order to establish a monopoly position The strategies that monopolists and oligopolists can adopt to deter the entry of new competitors. These kinds of strategies obviously make seller concentration and barriers to entry endogenous3 questions in IO • 3. How does the behavior of firms influence the structure or organization of markets and the performance of markets? • The emphasis of the previous question was on the effect of market structure on the conduct of firms. The emphasis here is on adopting a more dynamic perspective and recognizing the possibility of feedback effects from firm conduct to market structure. We might expect that strategies which firms adopt today are intended to change market structure and thus firm behavior tomorrow. It would seem in fact that many aspects of non-price competition, such as research and development, are specifically designed to alert market structure tomorrow. Clearly, the extent of product differentiation is not determined only by exogenous factors such as the preferences of consumers. Firms have some latitude to choose the characteristics, range, variety, and quality of products they sell. • Two issues that have received a great deal of attention are: • The potential strategies firms can adopt to drive competitors out of business in order to establish a monopoly position. • The strategies that monopolists and oligopolists can adopt to deter the entry of new competitors. These kinds of strategies obviously make seller concentration and barriers to entry endogenous