The dominance of the S-C-P approach
Joe Bain was one of those scholars who, in the 1930s at Harvard, had belonged to Mason’s group (Grether 1970). Thanks to Bain, the S-C-P approach became the dominant paradigm in IO.
In Bain’s studies the incumbents’ above-normal profits do not induce potential competitors to enter a market because of the presence of barriers to entry: in his statistical results entry barriers were positively correlated with high profits. As shown in the previous sections, the concept of barriers to entry was not a novelty for the discipline, but Bain is usually considered its originator (Mosca 2009). In 1956, he identified three sources of entry barriers, that is, scale economies, absolute-cost advantages, and product differentiation, the latter being the most significant. If monopolistic power depends on market structure, and if the market is concentrated due to entry barriers, then competition policies are needed. The impact on antitrust policy of Bain’s structuralist theory of markets was pervasive: these two decades are often called the golden era for antitrust de-concentration policies.