Definition of Industrial Concentration

In Chapter 10 we developed and applied a strict definition of monopoly. A ure mono oly, we said, is a one-firm industry—a situation whereby a unique product is being produced entirely by a single firm and entry to the industry is totally blocked.

In this chapter we will use the term industrial concentration to include pure monopoly and markets in which much potential monopoly power exists. Industrial concentration occurs whenever a single firm or a small number of firms control the major portion of the output of an industry. One, two, or three firms dominate the industry, potentially resulting in higher-than-competitive prices and profits. This definition, which is closer to how the general public understands the monopoly problem, includes many industries we have previously designated as oligopolies.

Industrial concentration in this chapter thus refers to industries in which firms are large in absolute terms and in relation to the total market. Examples are the telephone equipment industry, in which Nortel, large by any standard, dominates the market; the automobile industry, where General Motors of Canada, Ford of Canada, and DaimlerChrysler Canada are dominant; the chemical industry, dominated by Petro-Canada, Imperial Oil (Exxon), and Shell Canada; the aluminum industry, where industrial giant Alcan Aluminum reigns supreme; and the steel industry, where the two large producers, Dofasco, formerly Dominion Foundries & Steel, and Stelco, formerly Steel Company of Canada, command the lion's share of the market.

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