Skill: panlm/scp-paradigm (version 1.0.0)

--- name: scp-paradigm description: > Use when analyzing how industry structure drives firm behavior and market performance, assessing market concentration, entry barriers, or competitive dynamics using the Structure-Conduct-Performance framework. Triggers on "SCP", "structure conduct performance", "industry structure analysis", "market concentration", "entry barriers", "competitive behavior", "antitrust analysis", "SCP范式", "结构-行为-绩效", "行业结构分析", "市场集中度", "进入壁垒". --- # SCP Paradigm (Structure-Conduct-Performance) Analyze how market **Structure** determines firm **Conduct**, which in turn determines market **Performance**. Originated by Edward S. Mason (Harvard, 1930s) and formalized by Joe S. Bain (UC Berkeley, 1950s) as the foundational framework of Industrial Organization economics. ## Purpose - Understand causal links from industry structure to economic outcomes - Predict firm behavior based on structural characteristics - Assess whether an industry's performance is efficient or requires intervention - Support antitrust, regulation, and competition policy analysis ## When to Use - Analyzing competitive dynamics in a specific industry - Evaluating market entry feasibility based on structural barriers - Assessing whether industry concentration leads to anti-competitive behavior - Comparing industries with different structural characteristics - Informing policy or regulatory analysis ## When NOT to Use - For internal firm-level activity analysis (use Value Chain Analysis) - For macro-environmental scanning (use PESTEL) - For technology adoption timing (use Gartner Hype Cycle) - When the industry is too nascent to have stable structure ## Framework ### S → C → P Causal Chain ``` ┌─────────────┐ ┌─────────────┐ ┌─────────────┐ │ Structure │ ───▶ │ Conduct │ ───▶ │ Performance │ │ │ │ │ │ │ │ Market │ │ Firm │ │ Market │ │ conditions │ │ behavior │ │ outcomes │ └─────────────┘ └─────────────┘ └─────────────┘ ▲ │ └─────────── Feedback loops ──────────────┘ ``` Note: The original Mason-Bain model is unidirectional (S→C→P). Later scholars (Chicago School) recognized that conduct can reshape structure, and performance can trigger regulatory changes that alter structure. ### 1. Structure — Market Conditions Analyze the structural characteristics that constrain firm behavior: | Factor | Description | Key Indicators | |--------|-------------|----------------| | **Seller concentration** | Number and size distribution of firms | CR4, CR8, HHI (Herfindahl-Hirschman Index) | | **Buyer concentration** | Number and bargaining power of buyers | Buyer CR4, switching costs | | **Entry barriers** | Obstacles to new firm entry | Capital requirements, patents, scale economies, regulatory licenses | | **Exit barriers** | Obstacles to leaving the market | Sunk costs, asset specificity, contractual obligations | | **Product differentiation** | Degree of substitutability | Brand loyalty, perceived quality gaps, switching costs | | **Vertical integration** | Extent of upstream/downstream control | % of value chain controlled internally | | **Cost structure** | Fixed vs. variable cost ratio | Operating leverage, minimum efficient scale | ### 2. Conduct — Firm Behavior Analyze how firms behave given the structural constraints: | Factor | Description | Key Indicators | |--------|-------------|----------------| | **Pricing behavior** | How prices are set | Price leadership, collusion, predatory pricing, price wars | | **Advertising & marketing** | Promotional intensity | Ad-to-revenue ratio, brand investment | | **R&D and innovation** | Investment in new products/processes | R&D-to-revenue ratio, patent filings | | **Capacity decisions** | Investment in production capacity | Capacity utilization, strategic excess capacity | | **Collusion & cooperation** | Coordination among competitors | Tacit collusion, trade associations, joint ventures | | **Mergers & acquisitions** | Consolidation activity | M&A volume, horizontal vs. vertical deals | | **Legal tactics** | Use of IP, litigation, regulatory capture | Patent trolling, lobbying spend | ### 3. Performance — Market Outcomes Assess the resulting economic outcomes: | Factor | Description | Key Indicators | |--------|-------------|----------------| | **Profitability** | Returns above competitive level | ROE, ROA, economic profit, Lerner Index | | **Allocative efficiency** | Price vs. marginal cost | Price-cost margins, deadweight loss estimates | | **Productive efficiency** | Cost minimization | Unit costs vs. industry best practice | | **Dynamic efficiency** | Innovation and progress | New product introduction rate, productivity growth | | **Equity** | Distribution of surplus | Consumer vs. producer surplus, wealth concentration | ## Application Process ### Step 1: Define the Market ```markdown - **Industry/Market:** [Specific market definition] - **Geographic Scope:** [e.g., "China domestic cloud infrastructure market"] - **Time Period:** [e.g., "2023-2025"] - **Purpose:** [e.g., "Assess whether market entry is viable"] ``` Market definition matters — too broad dilutes analysis, too narrow misses substitutes. ### Step 2: Analyze Structure For each structural factor: 1. Collect data or make informed estimates 2. Assess whether the factor favors incumbents or entrants 3. Rate overall structural intensity (fragmented ↔ concentrated) ### Step 3: Predict/Observe Conduct Based on structure, predict or observe: - How do firms price? (competitive, oligopolistic, monopolistic) - How do firms compete? (price, quality, innovation, brand) - Is there evidence of coordination or anti-competitive behavior? ### Step 4: Evaluate Performance Assess whether outcomes are: - **Efficient** — prices near cost, innovation healthy, consumer choice adequate - **Inefficient** — supranormal profits, underinvestment, limited consumer options ### Step 5: Identify Feedback Loops Does conduct reshape structure? - Aggressive M&A → higher concentration - Innovation → new entry barriers (or destruction of old ones) - Lobbying → regulatory barriers ### Step 6: Strategic Implications ```markdown ## SCP Analysis Summary ### Structure Assessment - Concentration: [High/Medium/Low] — [evidence] - Entry barriers: [High/Medium/Low] — [key barriers] - Product differentiation: [High/Medium/Low] — [basis] ### Conduct Patterns - Dominant competitive mode: [price / quality / innovation / brand] - Coordination risk: [High/Medium/Low] — [evidence] ### Performance Assessment - Profitability: [Above/At/Below] competitive returns — [evidence] - Innovation: [Strong/Moderate/Weak] — [evidence] - Consumer welfare: [Favorable/Neutral/Unfavorable] ### Strategic Recommendations 1. [Recommendation based on structural opportunities] 2. [Recommendation based on conduct patterns] 3. [Recommendation based on performance gaps] ``` ## Common Pitfalls | Pitfall | Fix | |---------|-----| | Assuming strict one-way causation (S→C→P only) | Acknowledge feedback loops — conduct can reshape structure | | Using SCP for firm-level strategy without industry data | SCP is an industry-level framework; pair with firm-level tools like Value Chain | | Ignoring market definition sensitivity | Test conclusions under alternative market definitions | | Confusing correlation with causation | High concentration + high profits ≠ proof of anti-competitive conduct | | Static snapshot when dynamics matter | Track how structure evolves over time, especially in tech-driven markets | ## References ### Seminal Works - Mason, E.S. (1939). "Price and Production Policies of Large-Scale Enterprise." *American Economic Review*, 29(1), 61-74. - Bain, J.S. (1956). *Barriers to New Competition*. Harvard University Press. - Bain, J.S. (1959). *Industrial Organization: A Treatise*. John Wiley & Sons. ### Authoritative References - Wikipedia — Structure-Conduct-Performance paradigm: https://en.wikipedia.org/wiki/Structure%E2%80%93conduct%E2%80%93performance_paradigm - Wikipedia — Joe Bain: https://en.wikipedia.org/wiki/Joe_Bain - Bianchi (2013). "Bain and the origins of industrial economics." HAL Open Science: https://hal.science/hal-03470154v1/document ### Related Frameworks - **Porter's Five Forces** — Derived from SCP; operationalizes structural analysis for strategy - **Value Chain Analysis** — Complements SCP with firm-level activity decomposition - **PESTEL** — Macro factors that shape industry structure


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