By developing, analyzing and empirically applying models of industrial price formation (particularly in open economies), this book aims to show how models that are derived from the micro-economic theory of producer and consumer behaviour can actually help to explain price formation in industry. In general, existing models of macro-economic or industrial price formation are often constructed ad hoc, with little theory and many `plausibility' arguments. This yields little interpretation of the coefficients and thus few restrictions. A micro-economic approach, on the other hand, does present a clear interpretation of the coefficients and provide a theoretical basis for the inclusion of variables. This approach of applying models of industrial price formation can be used to answer questions surrounding the differences in profit margins and price flexibility between concentrated and less concentrated industries, and to examine whether strong foreign competition leads to low profit margins and lower price increases