The Structure of American Industry.

The structure of American industry is in flux. Over the last decade corporate America has undergone a great many evolutionary as well as regulatory changes. Advances in technological innovations, mergers and acquisitions, deregulatory actions, global integration, and trade liberalization altogether have redefined the boundaries of many markets and consequently their competitive conditions. These new developments necessitate a reexamination of today's market structure, and the ninth edition of this case book edited by Walter Adams and James Brock arrives at a timely manner.

The majority of the industries comprised in this collection are the same as those in its previous edition: agriculture, petroleum, steel, automobiles, beer, computers, motion picture entertainment, and airlines. Reflecting the growing health care and service sectors are the new entries of pharmaceuticals, casino gaming, and college sports that replace previous studies of telecommunications, national defense, and conglomerates.

The first chapter by Daniel Suits is devoted to the agricultural sector. Selected examples of crops and livestock are used to illustrate the general attributes of its markets. The study ends with a discussion on government programs and GATT. However, Suits ignores the overall increase in market concentration and the advent of agricultural trade with Mexico and Japan, which would prove to be influential in the future landscape of American farming.

In the second case study, Stephen Martin takes on a global look at the oil market, with particular attention to developments since the first oil crisis in the early 1970s. Unfortunately, perhaps due to space limit, the detailed coverages on international joint ventures, mergers, and foreign policy contribute to insufficient treatment of domestic oil companies.

In Chapter 3, the editors examine the automobile industry which has undergone a profound transformation. A great deal is devoted to the traditional Big-Three market structure, leaving little attention to recent developments, such as the raising share of Japanese imports, which have been influential to the industry's competitiveness. Its treatment would have been more provocative if the authors discussed the factors that have contributed to the differential performance of Japanese auto manufacturers and their transplants in the U.S. as compared to the American counterparts.

In Chapter 4, Walter Adams examines another declining industry: steel. In line with the automobile experience, the recent success of minimills has raised concerns about the extent of economies of scale in determining the industry's performance. The reliance on government trade protection for the industry's survival serves as further evidence against its current highly concentrated market structure as opposed to a more competitive one.

In Chapter 5, Kenneth Elzinga presents the beer industry. In contrast to the experience in the above industries, economies of scale have continued to be a contributing factor for the performance of the leading brewers in this oligopolistic industry. Yet the reader may also wonder how the current resurgence of microbreweries will affect the industry's future developments.

In Chapter 6, Neil Niman and Manley Irwin examine new developments in the computer industry. In light of the transformation from the mainframe-oriented industry dominated by IBM to a highly competitive industry of personal computing, this chapter contains major revisions from the one previously presented by James Brock. Despite the diversity of the industry, the authors pay most attention to personal computers, failing to account for their interdependence with other market segments, such as software and peripherals, as well as innovations in inputs, particularly microprocessors, that has played an important role in the pricing behavior and competitive conditions in this dynamic market. Since the market is ill-defined in the present study, the discussion inevitably suffers from incoherence. For instance, while the thrust of the study is personal computer hardware, the section on antitrust policy deals largely with Microsoft's dominance in the software market.

In Chapter 7, William Comanor and Stuart Schweitzer examine the pharmaceutical industry. Amid heated debates over a health care reform, the authors ironically claim the industry a success. They argue that, despite the supply conditions which are characterized by high fixed research cost and low variable production cost, its market conduct is driven solely by demand conditions based largely on physicians' prescribing decisions. They further defend the industry's above-cost pricing behavior using the principle of dynamic versus static efficiency.

The next four chapters draw attention to the service sector. In the studies of the motion picture entertainment by Barry Litman (Chapter 8) and airlines by William Shepherd and James Brock (Chapter 10), revisions appear mostly in new historical data updated from the previous edition. Nevertheless, the coverages in retrospect are insightful and well constructed within the structure-conduct-performance paradigm. One noteworthy treatment is Shepherd and Brock's illuminating arguments against the concept of contestability as well as deregulation in the airline industry.

In Chapter 9, Christian Marfels presents the growing industry of casino gaming. She ascribes the industry's high concentration to a high capital cost requirement and vigorous promotion activity, and competitive performance to its product's inherent homogeneity.

In Chapter 11, Cecil Mackey discusses the case of college sports. From the perspective of current developments in the sports arena, the coverage of professional rather than college sports would appear to be more timely and relevant. Despite the detailed discussion of the structure and behavior of the NCAA, the cartel of the "industry," the non-profit maximizing objective of its members makes a direct comparison with other industries difficult.

In the ending chapter, the editors attempt to convey to readers their position on antitrust principles. As a reflection of their observations of the 1980s - the collapse of the giant monopolies represented by IBM and the Soviet Union - they advocate vigorous antitrust enforcement as a mean to warrant market competition. Their arguments would have been more persuasive by drawing inferences from the industries evaluated in this volume. For instance, economies of scale, which form the basis for giantism, have been found to play a declining role in the majority of these industries.

As a whole this book covers a wide array of industries. Each case is self-contained and carefully researched, treating a distinct industry within the structure-conduct-performance organizational framework. Historical developments of the industries are well articulated. Basic economic concepts are introduced and well integrated into the context. Together with the contributors' similar, highly readable writing styles, it is convenient for the reader to draw cross-industry comparisons. However, many chapters contain insufficient global coverages, given the extent of globalization in production processes and market demand that has and will continue to influence the competitive conditions in the marketplace. In addition, an introductory or concluding chapter would have promoted a better understanding of the book's objective and what the studies altogether intend to deliver.

In this market segment of industry case studies, readers can find at least two close substitutes. The first is Deutsch's [1] collection of fifteen industries, whose selection better represents the composition of today's American industry. The second is Kwoka and White's [2] antitrust cases which are more suitable for advanced students. Like the others, the present case book contains extensive reading lists, and is a valuable supplement to industrial organization textbooks. Interestingly, as a reflection of the change-oriented industrial environment, the making of this revised volume has undergone two structural changes: (1) Walter Adams's new joint venture with James Brock, and (2) Prentice Hall's acquisition of the publisher of its previous editions, Macmillan.

Jim Lee Fort Hays State University 

References

1. Deutsch, Larry L,, editor. Industry Studies. Englewood Cliffs, New Jersey: Prentice Hall, 1993.

2. Kwoka, John E., Jr. and Lawrence J. White, editors. The Antitrust Revolution: The Role of Economics. Second Edition. New York: Haper Collins College Publisher, 1994.