Neoclassical Models of Industrial Organization

In this paper we will suggest that there are three existing theoretical models of neoclassical industrial organization to date; limit pricing, generalized oligopoly and contestability. We briefly survey them, analyze their underlying assumptions regarding new entry and their underlying justifications. We then compare them with existing alternative perspectives, Austrian and Marxist, and provide a common to all ceteris paribus diagrammatic framework. We conclude that real market structures are closer to the ideas of the generalized oligopoly model, a view we support by introducing the novel concept of inter-industry collusion. Also that all three models suffer from their common methodological focus on ‘single-exit’ situations and have little to offer by way of policy implications.