Market concentration helping upend conventional wisdom

IN recent years, markets have become more concentrated as dominant players such as Amazon, Facebook and Google have disrupted entire industries. Those dusty economic textbooks tell us that increased market concentration means less competition, which should result in higher prices. But what we've seen lately suggests the opposite may be happening.

Even though there are fewer, larger competitors on the playing field, these giants are competing on price, as they are often more concerned with growing scale rather than their bottom lines - particularly in the digital space. They are playing a game of "winner takes all", and the winners are winning big.

How concentrated have markets become?

The number of publicly-traded companies in the US is roughly half of what it was 20 years ago. Today there are around 3,600 listed companies, down from about 7,300 in 1996, as pointed out by Kathy Kahle and Rene Stulz in their 2017 paper Is The American Public Corporation In …