Question

When you consider Amazon or Google, you realize they have created millions of jobs and provided consumers with more convenience, choices and lower prices. Why is market concentration a cause for concern?

Answer 1

Market concentration is when smaller firms account for large percentage of the total market share i.e the market concentration is low when there are many small firms in the market and it is high when there are less small firms in the market. The measure of market concentration = 1/N, where N = number of firms in the market i.e. market concentration of 2 firms = 1/2 is larger than when the number of firms in the market is 10 = 1/10.

Market concentration a cause for concern because while amazon and google have created millions of jobs and provided consumers with more convenience, choices and lower prices, they are also creating a monopoly like power in the whole market worldwide. With the emergence of Amazon, there are many small firms or sellers who have not been able to compete with their huge capital, technology and marketing techniques like giving huge discounts. This in-turn lead those firms to exit the market and also many people indirectly lost their jobs because of this reason. Google on the other hand, there are many technology service providers who cannot compete with them and so they also had to shut down their operations.This is how other players in the market are at a disadvantage.

Consumers. on the other hand, are facing many advantages right now with more convenience than before and also lower prices. But, the main cause for concern is that these large market players are creating a monopoly like structure in the market, removing other players forcefully through high competition. Hence, when most of the players would exit the market, they would most likely try to charge abnormally high prices from the consumers in the market. This is how market concentration a cause for concern.