Strategies and market structures
In the 1910s further competition strategies were discussed, and the features typifying different market structures were identified with growing precision. In 1900 Ely grasped the monopolistic nature of trademarks, stated that substitute goods reduce market power and that economies of scale are a deterrent to entry.
He dealt with natural monopoly and consolidated the use of this expression in its modern meaning. His studies in Germany influenced his favourable view of an active economic role of the government. In the same year William M. Collier understood the strategic role of excess capacity, while in 1901 Knut Wicksell advanced a great deal further along the path towards defining perfect competition; he also provided an example of imperfect competition due to large overhead costs, joint supply, and location. In 1903 Maffeo Pantaleoni put forward an articulate analysis of horizontal as well as vertical integration, and regarded the latter with approval; he was against antitrust laws, considering them an unfair persecution of firms. In 1909 Pantaleoni also analysed in depth the effect of overhead costs on the size of firms. The American economist Henry Ludwell Moore, in 1906, in the first article explicitly devoted to the issue of competition, provided a new list of necessary prerequisites for defining a perfectly competitive market. As for the identification of market structures, a crucial role was played in 1908 by Enrico Barone: he gave the analytical definition of the minimum efficient scale and the optimal number of firms. He was also the first to work out a rigorous description of the characteristics of costs and demand that give rise to a situation of natural monopoly (Mosca 2008). The drawing of the first diagram with U-shaped cost curves was owed in 1911-13 to Edgeworth, and he showed for the first time in the literature how, in the case of natural monopoly, the demand function intersects the average cost curve in its downward sloping portion. In 1912 Irving Fisher discussed the idea of a separate market for each seller, while in the same year Arthur Cecil Pigou introduced the idea of “monopolistic” competition as opposed to “simple” competition. Henry Carter Adams, after having (in 1887) analysed the effects on market structure of different returns to scale, in 1918 stated that firm size is the cause of monopoly power. He was in favour of state intervention, the role of which he defined in detail. While market structures were being identified with growing precision, competition continued to be treated mostly in behavioural terms, as had been the case since the beginning of economic thought.