Technology and Market Structure: Theory and History Review

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(More customer reviews)I read this book in my first year of graduate study in Economics in a course on Industrial Organization. I highly recommend this book. It is NOT a text book, it does not go over the state of the art in I.O., it is Sutton's theory about market structure and concentration as shaped by ENDOgenous barriers to entry. This book is completely self contained but it carries over the line of research that Sutton started years ago with Sunk Costs and Market Structure in which he studied the role of Exogenous barriers to entry.
As with his previous book, I like it because it explains market structure using OBSERVABLE variables, because it tests the theory both via case study and via econometric methods and because it is full of innovative ideas. The way in which Sutton tackles the problem of multiplicity of Nash equilibria, what he calls "the bound approach", is still making me think one year later.

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Economists have traditionally taken two very different approaches to studying market structure. One looks to "industry characteristics" to explain why different industries develop in different ways; the other looks to the pattern of firm growth within a "typical" industry to describe the evolution of the size distribution of firms. In his new book, John Sutton sets out a unified theory that encompasses both approaches, while generating a series of novel predictions as to how markets evolve. Using statistical analysis and a detailed examination of industry histories, he rigorously tests these new predictions. Data in the paperback edition have been revised and updated.

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