Concentration and performance: The new thinking and some Canadian evidence

There is no more pervasive economic doctrine than the belief that an increase in industrial concentration results in greater monopoly power and higher profits, but some recent American research contradicts that traditional hypothesis. This paper summarizes that research and presents new Canadian evidence, taking the first step toward ending Canadian dependence upon cross-section data. Time-series analysis shows that changes in concentration between 1948 and 1965 did not bring the traditionally expected changes in profit rates. Most cross-section tests with the new evidence also contradict the traditional hypothesis. These findings encourage further open-minded questioning and suggest some avenues for additional research.