No, Senator Warren, Industry Concentration Is Not Driving Up Prices; That’s One of Many Monopoly Myths

December 7, 2021

WASHINGTON—Responding to comments made by Sen. Elizabeth Warren (D-MA) ahead of a tech-sector competition hearing in the Senate Subcommittee on Fiscal Responsibility and Economic Growth, the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy, released the following statement from Aurelien Portuese, director of ITIF’s Schumpeter Project on Competition in the Innovation Economy:

It is a myth that industry concentration is leading to higher price markups. Antitrust advocates often claim companies have been marking up their prices more in recent years because they have gained market power, but the evidence is extremely weak.

Price markups are notoriously difficult to measure, especially at the firm level. ITIF has reviewed the academic literature and found that the studies that purport to find increases usually miscalculate by failing to consider changes in marginal costs, especially related to the growing share of intangible capital.

To understand how weak the pricing allegation is, consider the fact that in some industries, markups have increased for both small and large firms—and they have gone up in a range of countries, all with different antitrust regimes. So, the evidence suggests something other than a decline in competition is at work.

An especially inconvenient fact is that in many industries with a rise in aggregate markups, the cause appears to be an increase in competition, not market power. Market share is shifting toward more productive, more innovative firms, and this is a trend we should welcome.

The pricing allegation is one of many similar monopoly myths driving the antitrust debate, particularly among progressives. It’s time to focus on the facts.

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No, Senator Warren, Industry Concentration Is Not Driving Up Prices; That’s One of Many Monopoly Myths