Evaluating Consolidation and the Threat of Monopolies within Industrial Sectors

Abstract

Economics scholars and policy-makers in recent years have rung alarm bells about the increasing threat of consolidation and concentration within industrial sectors. This paper examines the importance of industrial consolidation in two ways: first, as a direct relationship between concentration and performance outcomes; and second, as an indirect relationship, where concentration influences performance through reduced competition for government contract business. The paper finds that both increasing consolidation and decreasing competition are associated with an increase in contract cost ceiling breaches but also lower rates of termination. Subsequent stages of research will examine the interrelation of consolidation and competition.