market conduct

market conduct

the behavioural characteristics of suppliers and buyers operating in a MARKET/INDUSTRY. Key elements of market conduct include:
  1. the BUSINESS OBJECTIVES of suppliers (for example profit and sales growth targets), and the product requirements of buyers (for example low prices, product performance and sophistication);
  2. the MARKETING instruments and strategies available to firms which can be used to establish COMPETITIVE ADVANTAGE over rival suppliers. These include various pricing tactics (MARKET PENETRATION PRICING, MARKET SKIMMING PRICING, etc.) and MARKETING-MIX combinations such as advertising and sales promotion, quality variations, packaging and design etc. The choice of appropriate marketing strategies will, of course, vary from market to market depending on product characteristics and, critically, on an understanding of those product attributes which command buyer satisfaction (see MARKET RESEARCH);
  3. the mutual interdependency of suppliers which serves to constrain individual freedom of action and often leads, particularly in markets characterized by high seller concentration, to coordinated behaviour patterns, for example PRICE LEADERSHIP and COLLUSION;
  4. the relationships between suppliers and buyers, in particular the impact of bulkbuying policies (see MARKET CONCENTRATION, MARKET STRUCTURE).

In sum, most markets exhibit both competitive and cooperative tendencies, and firms must be mindful of these forces in formulating appropriate business strategies.

COMPETITION POLICY interest in market conduct is centred on the potentially adverse effect of market power on MARKET PERFORMANCE, either exercised by a DOMINANT FIRM or deriving from collusion between firms. See MARKET STRUCTURE-CONDUCT-PERFORMANCE SCHEMA.

market conduct

the ‘things done’ by firms in their capacity as suppliers (and buyers) of goods and services. Key elements of market conduct include:
  1. FIRM OBJECTIVES, for example, profit, sales and asset growth targets;
  2. the COMPETITION METHODS deployed by firms to achieve their objectives, in particular their policies on PRICE and output levels and PRODUCT DIFFERENTIATION;
  3. INTERFIRM CONDUCT, specifically the extent to which firms in a market compete against each other or seek to coordinate their pricing behaviour (see COLLUSION).

In the THEORY OF MARKETS, market conduct interacts with MARKET STRUCTURE in determining MARKET PERFORMANCE, while market structure and market performance, in turn, affect market conduct. See MARKET STRUCTURE-CONDUCT-PERFORMANCE SCHEMA, PERFECT COMPETITION, MONOPOLISTIC COMPETITION, OLIGOPOLY, MONOPOLY.