3 questions in IO 2. How does the manner in which markets are organized affect the way in which firms behave and market perform? If products produced by different firms are not viewed as perfect substitutes Qly consumers, then there will be a role foe non-price competition. In fact price competition might play a secondary role to other competition, such as product characteristics, advertising, and research and development expenditure A major area of research in industrial organization is concerned with the theory of oligopoly: pricing behavior in a market dominated by a few large firms a different kind of structural issue concerns the various institutions and practices adopted by oligopolistic firms to affect the nature of competition Adam Smith competitive markets were desirable because they led to outcomes that are socially optimal. Under certain circumstances, competition as if guided by an invisible hand results in the socially optimal level of output being produced at minimum resource cost, and distributed it to those who value it the most io is concerned with the efficiency or market performance of markets whose structure is not that are: What will the efficiency properties of imperfectly competition markets be, not just in terms of output but also in terms of product variety, quality, selection, and innovation? Is there a role for government intervention in terms of regulation or competition policy? Can We identify combinations of market structure and firm behavior where market outcomes are socially undesirable and susceptible to improvement? What are the economic foundations for regulation and antitrust policy? Why are intellectual property rights-patents, copyrights, and trademarks -created and enforced by the government?3 questions in IO • 2. How does the manner in which markets are organized affect the way in which firms behave and market perform? • If products produced by different firms are not viewed as perfect substitutes by consumers, then there will be a role foe non-price competition. In fact price competition might play a secondary role to other competition, such as product characteristics, advertising, and research and development expenditure. • A major area of research in industrial organization is concerned with the theory of oligopoly: pricing behavior in a market dominated by a few large firms. • A different kind of structural issue concerns the various institutions and practices adopted by oligopolistic firms to affect the nature of competition. • Adam Smith: competitive markets were desirable because they led to outcomes that are socially optimal. Under certain circumstances, competition, as if guided by an invisible hand, results in the socially optimal level of output being produced at minimum resource cost, and distributed it to those who value it the most. IO is concerned with the efficiency or market performance of markets whose structure is not that are : What will the efficiency properties of imperfectly competition markets be, not just in terms of output but also in terms of product variety, quality, selection, and innovation? Is there a role for government intervention in terms of regulation or competition policy? Can we identify combinations of market structure and firm behavior where market outcomes are socially undesirable and susceptible to improvement? What are the economic foundations for regulation and antitrust policy? Why are intellectual property rights-patents, copyrights, and trademarks –created and enforced by the government?