Edited by Manfred Neumann and Jürgen Weigand
Chapter 8: Reconceptualizing competition and competition policy in a new institutional economics-perspective
Understanding how markets function has been one of the core issues of economics (cf. Smith, 1776). Since the belief in the invisible hand, which ensures that markets function in an institutional vacuum (see e.g. Henderson and Quandt, 1985) has vanished, understanding of the institutional framework for markets has become another core issue of economics. A sub-discipline of economics – ‘industrial organisation’ or ‘industrial economics’ – deals with these issues. Various and diverse approaches of industrial organization (IO) compete today. Mainstream IO-theory starts with the workable competition-approach and the structure conduct performance-approach (SCP-approach, Bain, 1959/1968; Caves, 1964/1992) that are challenged by efficiency-oriented ones, including game-theory-based, and by evolutionary approaches. New Institutional Economics (NIE) has been brought into play when discussing markets and their institutional framework, but not systematically.
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