When is Concentration Beneficial?

This paper separates market power and efficiency effects of concentration in a sample of 255 U.S. manufacturing industries and computes welfare changes from rises in concentration. The empirical findings reveal that in nearly two-third of the cases, consumers lose as efficiency gains are generally pocketed by the industries. From an aggregate welfare standpoint, concentration is found to be beneficial in nearly 70% of the cases, mostly for low and moderate levels of concentration being particularly against the public interest in highly concentrated markets. Overall, the results support the existing U.S. Federal Trade Commission guidelines for approval of mergers.


Issue Date:
2001
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/25201
Total Pages:
11
Series Statement:
Research Report No. 62




 Record created 2017-04-01, last modified 2017-08-24

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