Evaluating Consolidation and the Threat of Monopolies within Industrial Sectors

Abstract

Economics scholars and policy makers have rung alarm bells about the increasing threat of consolidation and concentration within industrial sectors. This paper examines the importance of industrial concentration in two ways: first, a direct relationship between concentration and performance outcomes; and second, an indirect relationship, where concentration influences performance through reduced competition for defense acquisition. The study finds that consolidation correlates with lower rates of termination but has mixed associations with ceiling breaches. Contrary to hypothesis, competition is associated with higher rates of termination and that only single offer competition is associated with lower rates of cost ceiling breaches.