Market concentration can benefit consumers, but needs scrutiny

WHEN Amazon announced in June that it would buy Whole Foods, an upmarket grocer, for $13.7bn, other firms shuddered. The spread of Amazonian tentacles is worrying to those wary of concentrated corporate power. But shoppers entering their local Whole Foods these days find oddly low prices alongside the new stacks of Echoes, Amazon’s voice-activated digital helpmate. This raises a question. Is Amazon hellbent on building a world-straddling monopoly, or merely injecting innovation and competition into yet another new market? For antitrust regulators, the welfare of the consumer is the priority. Yet working out how to protect it is harder than ever.

Competitiveness in most industries is a matter of degree. In the idealised marketplace of economics textbooks, the price people pay for goods equals the cost of producing an additional unit. Any higher, the theory goes, a competitor could cut the price a smidgen, sell another unit and profit. Yet outside commodity markets, most firms can charge…Continue reading
Source: Business and Finance