Proto-History (from 1890 to 1930)
From the point of view of the history of IO, 1890 was a very important year both in Europe and in the US. In Europe it was the year when Alfred Marshall’s Principles of Economics was published, giving rise to neoclassical economics; in the US it was the year of the introduction of the Sherman Act, the first antitrust law.
From 1890 to 1930 the focus on issues that today belong to IO increased for two different kinds of reason. The first concerns the economic situation: new phenomena like trusts, cartels, mergers, the vertical integration of firms, public utilities, and the railways, raised new problems. Compared with the world of the classical economist, the provisional character of the obstacles to competition no longer seemed to apply; in certain cases entering a market turned out to be very difficult even in the absence of legal barriers; market power, whether generated by strategies or obstacles, proved to be long lasting. Faced with these new phenomena, economists tried to understand why in certain markets there were few firms, if they should be worried about their size, whether this was on the contrary an advantage, or whether one could count on their reciprocal rivalry. The second kind of reason is linked to method: in the light of the emerging neoclassical notion of perfect competition, all strategic behaviours of firms were interpreted as a sign of monopoly, and no longer as an expression of competitive behaviour; as such, once again, though for other reasons, it caused concern.