The linear structure-conduct-performance model depicted in Figure 1 -1 presumes very simple causal relationship. Structure determines conduct, conduct determines performance, and it’s time to go home. But it is evident from our brief discussion of the structure-conduct-performance model that industrial relationships are not so simple. The linear structure-conduct-performance model has been augmented to reflect the interaction among structure, conduct, and performance that occur in real-world markets.
The relationship among structure, conduct, and performance are complex and interactive. Structure and conduct are both determine, in part, by underlying demand condition and technology. Structure affects conduct, as shown in Figure 1-1, but conduct-strategic behavior-also affects structure. Structure and conduct interact to determine performance. Sales efforts-an element of conduct-also feed back and affect demand.
Performance, in turn, feeds back on technology and structure. Progressiveness molds the available technology. Profitability, which determines how attractive it is to enter the market, has a dynamic (inter temporal) effect on market structure.
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