Question

A reverse or two-way causation may occur in the S-C-P paradigm”. Explain this proposition with support of three examples.

Answer 1

S-C-P model describes structure-conduct-performance model.It depicts two way causation in the sense that if the structure (S)of market situation leads to good market information flow ,perfect competition will be there in the market which in turn causes or leads to efficiency,more satisfaction of both consumers and producers.Or if structure allows for more diversification,more entry and exit of market players ,then there will be more products available in the market which will cause more revenue ,more demand for the products.Hence there is two way causation.Both ways are causing each other.

Similary Conduct (C),this is basically how the sellers and buyers are behaving amongst themselves.How healthy is branding,how healthy is their pricing objectives,if there is price war,firms will suffer and if there are mergers or collusions and then profits are being shared in the form of initial investments made by each market player.

At last performance(P),if all the factors contribute well and if factors cause good growth and profitability ,and good quality of products then there will be trust build up and good response from the consumers side.

Hence all these shows there is two way causation.