Price-Concentration Analysis: An example from Staples Office Depot 1997

Analytics

A frequently posed question regarding competition is how market concentration impacts prices. Specifically, a reduced number of firms typically leads to higher market concentration, which results in diminished competition and increased profits. Researchers empirically examined this intuition during the 1960s, building upon the foundational work of Joe S. Bain. Furthermore, subsequent studies expanded to empirically assess the relationship between prices and market concentration. These findings significantly influenced competition policies at the time, highlighting the potential negative effects of high market concentration on consumers.