market performancethe effectiveness of suppliers in a MARKET/INDUSTRY in utilizing economic resource to their maximum efficiency and to the ultimate benefit of consumers. Key elements of market performance include:
- productive efficiency – the cost effectiveness of firms in producing their outputs. Ideally, outputs should be produced in plants of optimal scale, that is, plant sizes which fully exploit available ECONOMIES OF SCALE so that minimum cost levels are attained;
- distributive efficiency – the utilization of cost-effective channels of distribution and marketing techniques so as to minimize distribution costs;
- the setting of ‘fair’ prices to consumers, that is, prices which are consistent with the real economic costs of supplying the product, including a reasonable (i.e. non-monopolistic) profit return to suppliers;
- product performance – the satisfaction of consumer demands for product variety and sophistication, that is, the maximization of consumer choice and value-for-money attributes;
- technological progressiveness -the introduction of process and product innovations which enable supply costs and prices to be reduced in real terms and which provide consumers with technically superior products (see RESEARCH AND DEVELOPMENT).
Market performance is determined primarily by MARKET STRUCTURE and MARKET CONDUCT. For example, in markets where economies of scale are significant, a high level of MARKET CONCENTRATION may be required in order to minimize supply costs. In conduct terms, price COMPETITION between firms is likely to benefit consumers whereas COLLUSION is likely to have an adverse effect on consumer welfare. These and other elements of market structure and conduct are a major concern of a government's COMPETITION POLICY and INDUSTRIAL POLICY. See MARKET STRUCTURE-CONDUCT-PERFORMANCE SCHEMA.
market performancethe efficiency of a MARKET in utilizing scarce resources to meet consumers’ demands for goods and services; that is, how well a market has contributed to the optimization of economic welfare. Key elements of market performance include:
- PRODUCTIVE EFFICIENCY;
- DISTRIBUTIVE EFFICIENCY, that is, the ability of a market to produce and distribute its products at the lowest possible cost;
- ALLOCATIVE EFFICIENCY, that is, the extent to which the market prices charged to buyers are consistent with supply costs, including a NORMAL PROFIT return to suppliers;
- TECHNOLOGICAL PROGRESSIVENESS, the ability of suppliers to introduce new cost-cutting production and distribution techniques and superior products over time;
- PRODUCT PERFORMANCE, that is, the quality and variety of products offered by suppliers.
In the THEORY OF MARKETS, market performance is determined by the interaction of MARKET STRUCTURE and MARKET CONDUCT, while market performance itself has an effect on market structure and conduct. See PARETO OPTIMALITY, RESOURCE ALLOCATION, MARKET STRUCTURE-CONDUCT-PERFORMANCE SCHEMA, PERFECT COMPETITION, MONOPOLISTIC COMPETITION, OLIGOPOLY, MONOPOLY.