tag:blogger.com,1999:blog-5404820640426099135.post307557560737568825..comments2023-10-31T00:46:35.316+13:00Comments on Anti-Dismal: Market concentration,Paul Walkerhttp://www.blogger.com/profile/13731003529546075700noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-5404820640426099135.post-55979576931388931912016-05-03T11:36:38.161+12:002016-05-03T11:36:38.161+12:00Had much the same thought about a small group buyi...Had much the same thought about a small group buying up the rest, but how does this explain the ever decreasing lifespan of the top firms? Are an even smaller group now buying up the small group? If the 100 keeping buying up the rest they would at some point own everything and thus live forever. There is also the point that the top 100 keep changing.Paul Walkerhttps://www.blogger.com/profile/13731003529546075700noreply@blogger.comtag:blogger.com,1999:blog-5404820640426099135.post-70761948764993910002016-05-03T09:26:37.212+12:002016-05-03T09:26:37.212+12:00That's an interesting argument and on its face...That's an interesting argument and on its face looks reasonably persuasive. But it may have holes in it.<br />Suppose for example the top 100 in the 500 buy up the other 400. Now you have big turnover in the 500 since the bottom 400 are all new names, but also (arguably) a big increase in concentration and market power. And if the top 100 keep buying the bottom 400, turnover will persist, average life in the 500 will go down, and market power will keep on increasing. The argument that 'too many' mergers are being allowed would then be entirely consistent with the observed data.<br />There are two other possibilities that would need to be thought about. One is that the 500 is based on revenue, which I take to be nominal $ of the day. In that case you'll get sectors like the oil companies coming in and out of the index due to oil price movements alone, and that surface turnover will be telling you very little about underlying industrial structure.<br />The other is sectoral rotation. The big industries of say 50 years ago are very likely not the big industries of today. But you could easily have one set of oligopolistic industries being replaced by another, purely because of changes in technology or consumer preference. Mainstream media may have been knocked over by social media - you'll see the newspapers dropping out and the Googles coming in, for example - but it's arguable that the social media are more concentrated than the newspapers ever were. So there won't necessarily be any link between increased 500 turnover and market power in that case, either, esp if the pace of tech change picks up (as you'd think it did from the '80s onwards).<br />None of this is to say that the decreased 500 longevity / less market power argument is definitely wrong, but it would need a good deal more evidence to make the link conclusive.Donal Curtinhttps://www.blogger.com/profile/03687495556590450225noreply@blogger.com