The structure-conduct-performance approach
Still at Harvard, in the 1930s and 1940s, Mason adopted an approach based on case studies. From this applied approach there emerged an analytical framework known as Structure-Conduct-Performance (S-C-P) which dominated IO studies until the early 1970s.
This paradigm explained the working of imperfectly competitive markets by means of the hypothesis that industry structure (concentration) affects the firm’s conduct (pricing behaviour), which in turn influences the industry performance (profits). To verify the hypothesis of a causal relation between market structure and performance, Mason and his group of scholars classified many industries into different market structures. Thanks also to the concept of “workable competition” expressed by J.M. Clark in 1940 as a useful operational instrument for the measurement of the strength of real competition, the S-C-P paradigm led to a great many cross-industry studies. On grounds of economic policy, this approach, with its emphasis on market structures, provided a persuasive theoretical justification for antitrust interventions designed to reduce firms’ market shares. In these years alone, many antitrust actions based on this approach were undertaken with the aim of enforcing de-concentration policies (Kovacic and Shapiro 2000).