Debate Magazine

"Trust Me, We’ve Been Thinking About Market Power and Competition All Wrong"

Posted on the 13 November 2018 by Markwadsworth @Mark_Wadsworth

... says Ryan Bourne in City AM.
Well, no we haven't, but he makes a good point about one specific topic - that there is a difference between national and local market power/concentration:
Back in the 1950s, many UK villages and towns were served by a single grocer, butcher, and baker. These independent local stores would, in effect, be local monopolies, but had tiny share of the market for the whole country.
Today, major supermarket chains have gone from strength to strength, exploiting economies of scale and creating cost-effective distribution systems. Tesco, Sainsbury’s and others serve hundreds and thousands of locations, while engaging in cut-throat competition with each other.
As a result, at a national level the supermarket industry looks highly concentrated. The biggest four firms had 72.3 per cent of the market in 2016. But at a local level, many areas have seen huge increases in competition. They are now served by at least two supermarkets, as well as other stores, instead of the local monopolies of the past.

Or to put it another way, let's assume each town/area is served by two of the big supermarket chains. They are in competition and the consumer benefits. If the government were to force the big supermarket chains to close half their outlets, this would clearly reduce their national market share, but their remaining outlets would face less competition in all the towns/areas which are now only served by one large supermarket, and the consumer loses out.


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