Monday, April 18, 2016

Indicators Show US Business Competition Is Decreasing

From The Wall Street Journal, "Competition: Every market is unique and some rules can do more harm than good" by chief economics commentator Greg Ip:
In a report released April 15, President Barack Obama’s Council of Economic Advisers cite evidence of anticompetitive market power throughout the U.S. economy. In most industries, the 50 largest companies control more market share in 2012 than they did in 1997. Corporate return on capital significantly exceeds the cost of capital by a large margin. Returns have risen far more for the most profitable companies than the least profitable. In a perfectly competitive market, new capital should flood into those profitable industries, driving down the incumbents’ returns.
Read the Council Of Economic Advisers Issue Brief, April 2016, "Benefits Of Competition And Indicators Of Market Power."
Several indicators suggest that competition may be decreasing in many economic sectors, including the decades-long decline in new business formation and increases in industry-specific measures of concentration.
The causes underlying a possible decrease in competition and corresponding increase in market power are not clear, but candidate explanations include efficiencies associated with scale, increases in merger and acquisition activity, firms’ crowding out existing or potential competitors either deliberately or through innovation, and regulatory barriers to entry such as occupational licensing that have reduced the entry of new firms into a variety of markets.

1 comment :

  1. There is no specific way to be certain about what the economy will bring. However, there is still the option for us to study various market trends such as the finance sector to analyze the patterns which have been recurring since a decade back or so. Even so, it will still not be a hundred percent certain piece of information.