MARKET STRUCTURE, CAPACITY EXPANSION, AND PRICING: THE CASES OF THE UNITED STATES IRON AND STEEL INDUSTRY, 1907-1930 AND THE JAPANESE IRON AND STEEL INDUSTRY, 1957-1975

The main objective of this thesis is to study empirically the simultaneous and recursive relations between short-run pricing, capacity decision, and fluctuations in the elements of market structure. The thesis considers the following general issues: (a) how the industry adjusts toward the long-run equilibrium; and (b) how short-run price and output are determined while on the adjustment path. Specifically the thesis analyzes (i) the effect of changes in the elements of market structure on the determination of short-run prices and on the capacity decisions; and (ii) the way in which those elements of market structure change over time as a result of past market conduct. The thesis pays particular attention to the effect of shifts in the degree of mutual dependence recognized or the level of seller concentration on the firm's decision variables. It then explores the dynamics of change in seller concentration.; For this purpose, two separate time-series industry models were constructed and applied to the particular industries. The first model was constructed to analyze the industry where the largest firm accounts for a large proportion of market and was applied to the United States iron and steel industry for 1907-30. The second model was constructed to analyze the industry where the largest few firms account for a large proportion of market and was applied to the Japanese iron and steel industry for 1957-75.; The statistical results from these two empirical models first imply that over time industry market structure--especially seller concentration--might change endogenously in the system. And the way in which seller concentration shifts over time depends on the initial competitive structure of the industry and the pattern of market rivalry which is to some extent derived from the structure. Both models in this thesis also indicated that seller concentration as an element of market structure was a significant determinant of short-run prices and had a significant effect on the capacity decisions. Thus the models imply that short-run shifts in the element of market structure affect market conduct and thus performance. These findings of the thesis support the proposition that market structure affects market conduct at any moment in time while it is to some degree shaped by past market conduct or behavior and structure.