Review of empirical literature on industrial concentration

Suttons work looks at the numbers of firms in the market and their shares of production in the market and the relationship between that in a different oligopoly models where a small number of firms controls the majority of the market share, the study also looks at the difference between horizontally, homogenous and vertically differentiated products.

Home

The work from Sutton (1991, 1998) had very specific point to outline. Varies oligopoly models produces different forecast about the connection between the numbers of firms in the market and the size of the market size. The work outlined the difference between endogenous sunk cost and exogenous sunk cost. The Sutton approach is not suppose to create a single predication, but it looks to create different rage of predictions in varies oligopoly models, with are varied in different factors which are very hard to measure theoretically. Resulting in the developing the lower bound which is the least level of concentration acceptable for anything to happen in the long term equilibrium and nothing can be sustained for the long run if it is below the lower bound level. “Sutton looks for only robust results applicable to a large domain of industries“¹ meaning that the approach only looks at strong realistic results therefore, the approach was developed by having in mind the game theoretical oligopoly models. The approach allows people to choose from different hypothesis about the nature of competition in the market, such as Bertrand competition or Cournot competitions: