Market Concentration in Europe: Evidence from Antitrust Markets

43 Pages Posted: 1 Feb 2021

See all articles by Pauline Affeldt

Pauline Affeldt

German Institute for Economic Research (DIW Berlin); Technische Universität Berlin (TU Berlin)

Tomaso Duso

German Institute for Economic Research (DIW Berlin); TU Berlin- Faculty of Economics and Management - Empirical Industrial Organization; Centre for Economic Policy Research (CEPR)

Klaus Gugler

Vienna University of Economics and Business

Joanna Piechucka

German Institute for Economic Research (DIW Berlin)

Multiple version iconThere are 3 versions of this paper

Date Written: January 2021

Abstract

An increasing body of empirical evidence is documenting trends toward rising concentration, profits, and markups in many industries around the world since the 1980s. Two major criticisms of these studies is that concentration and market shares are poorly measured at the national industry level while firm level revenues are a poor indicator of product sales. We use a novel database that identifies over 20,000 product/geographic antitrust markets affected by over2,000 mergers scrutinized by the European Commission between 1995 and 2014. We show that concentration, as measured by the market-specific post-merger HHI, is larger than reported in the extant literature (at least) by a factor of ten. We also show that concentration has increased over time on average. Yet, there is a great deal of heterogeneity across geographic markets and within broader industries. In a regression analysis that exploits this within-industry variation, we show that barriers to entry are unambiguously positively related to concentration irrespective of time periods, sectors of activity, and geographical market dimension analyzed. Strict past merger enforcement negatively correlates with concentration. Yet, this effect is stronger in the earlier decade (1995-2004) than subsequently. Intangibility of investments consistently displays positive correlation with concentration only for EU wide and worldwide services markets. In contrast, the correlation is negative in national markets. This underscores the importance of the large heterogeneity present in concentration developments across markets.

Keywords: Concentration, HHI, market definition, entry barriers, mergers, merger control, intangibles

JEL Classification: L24,L44,K21,O32

Suggested Citation

Affeldt, Pauline and Duso, Tomaso and Gugler, Klaus and Piechucka, Joanna, Market Concentration in Europe: Evidence from Antitrust Markets (January 2021). DIW Berlin Discussion Paper No. 1930, Available at SSRN: https://ssrn.com/abstract=3775524 or http://dx.doi.org/10.2139/ssrn.3775524

Pauline Affeldt

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Technische Universität Berlin (TU Berlin) ( email )

Straße des 17
Juni 135
Berlin, 10623
Germany

Tomaso Duso (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

TU Berlin- Faculty of Economics and Management - Empirical Industrial Organization ( email )

Berlin, 10585
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Klaus Gugler

Vienna University of Economics and Business

Welthandelsplatz 1
Vienna, 1020
Austria

Joanna Piechucka

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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