Competition and Concentration: An Unclear Connection

Concentration is a poor measure of competition, because large businesses can be better for consumers than small ones. And concentration isn’t even rising in the ways that would matter.


Concentration measures the size and number of businesses competing in a market, and is sometimes used as a barometer of competition. Measures of concentration nationally show that in many markets it has been rising, which some point to this as evidence of falling competition.


Concentration has generally been falling in local markets, and inferring anticompetitive effects from market structure can be misleading. Large businesses with economies of scale can offer cheaper products and spread new technology more rapidly, for the benefit of consumers.

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