Introduction

Mobility statistics directly measure the extent to which firms replace one another during the course of the competitive struggle. Measures of market structure have tended to focus on inequalities in firm size during the course of the struggle. The two measures therefore address quite different questions about the competitive process. This chapter asks how they are related. In doing so, it provides evidence that the two measures need to be used in conjunction with each other rather than separately because the information they produce is complementary. This chapter asks whether the dimensions of intra-industry mobility are captured by concentration statistics. Chapter 8 reverses the question and asks whether mobility statistics explain concentration levels.

Concentration statistics: the conventional wisdom

In the field of industrial organization, market structure is seen as having considerable stability. This is based on two inter-related but mutually reinforcing factors, one empirical, the other theoretical.

The measure of market structure that is most widely used in the United States, the United Kingdom, and Canada is a measure of concentration. The most commonly used concentration measure is the percentage of output (or any other indicator of industry size, such as employment or assets) accounted for by a small number of the largest firms – typically four in North America. Measures of concentration capture characteristics of the firm-size distribution at a point in time. The size distribution changes slowly over time and so do the associated measures of concentration.