Industrial Concentration and Price Inflexibility

Industrial Concentration and Price Inflexibility

Industrial Concentration and Price Inflexibility

Industrial Concentration and Price Inflexibility

Excerpt

In recent years the traditional indictment of monopoly has been extended to cover the borderland of cases between monopoly and competition. "Concentration" is the term applied in empirical economic literature to situations in which the number of sellers is too few for pure competition but too many for complete monopoly.

In the years following the 1929 crisis, concentration in industry--as in other fields--has been assailed considerably because of its allegedly undesirable economic consequences. In purely economic terms the indictment has two main counts. The first of these is traditional, having its origins in both the popular and judicial outcries against monopoly. The charge is that monopoly--and, by implication, any condition approaching monopoly--results in higher prices to buyers than those necessary to call forth supplies. This criticism and its amplification are cast in modern theoretical terms in Chapter I. The second criticism of concentration has to do with the failure of the economy as a whole to recover to reasonably full employment following the debacle in 1929. This newer charge is concerned less with the question of unnecessarily high prices to consumers than with low aggregate employment allegedly due to artificial maintenance of prices following the general slump in demand. Most of the remainder of the study will be devoted to an examination of this aspect of concentration.

One of the first difficulties which confronts the investigator is the absence of agreement in terminology and even in basic approach to the problem. The term "concentration," for instance, does not even appear in the theoretical literature relating to the problem. The term itself and much of the discussion of the consequences of concentration appears in what used to be called "institutional" literature. There is at the outset, therefore, a surprisingly wide hiatus between the theorist and the empirical writer.

The reasons for non-cooperation between theorist and empiricist are not hard to find. Although theorists before 1929 had not ignored the . . .

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