(1/12) Does the corona virus drive markets towards higher concentration? The short answer is probably "yes," but with important nuance. Thread. -->

(2/12) Some great arguments for higher concentration are provided by @mattkahn1966. He focuses on returns to scale in dealing with the virus itself and in keeping it out of the firm's facilities. -->

(3/12) Screening technologies, minimizing employees' exposure (e.g., private bus to work) require fixed costs that are more easily born by large firms. Larger firms are therefore better able to protect their workers, resulting in higher employee motivation and retention. -->

(4/12) Larger firms also have stronger incentives to fight the virus effectively, in part, because of reputation effects. The complete piece from @mattkahn1966 is here and is highly recommended , but there's more... -->
http://greeneconomics.blogspot.com/2020/04/larger-firms-have-adaptation-advantage.html

(5/12) Antitrust laws may become less enforceable in corona times, further bolstering market power. First, who's paying attention? Second, it is easier to sell a "failing firm defense" of a merger when so many firms are, well, failing... ->

(6/12) Third, in times of crisis people turn to the safe and the familiar. What's more familiar than the embracing arms of a large monopolist? Competition, on the other hand, may be viewed as a destabilizing force at a time when instability is the last thing people look for. -->

(7/12) Is it guaranteed, then, that covid-19 will enhance market power and concentration? Not so fast. While this can be expected in many sectors, our IO training suggests a more industry-specific view. And taking that view, along with reading John Sutton's book, suggests -->

(8/12) there should also be opportunities for small competitors to thrive during this crisis. Let's start with "endogenous fixed cost" industries where advertising is key to market dominance (e.g., branded clothing?). A decline in demand due to the crisis ->

(9/12) could imply lower ad spending by big fashion outlets, allowing smaller firms to gain more attention and higher market shares. Some sectors may also experience *higher* demand in corona times, e.g. firms selling cooking appliances. To the extent that these -->

(10/12) are "exogenous fixed costs" areas, concentration may actually go down in some of these sectors. So, basically, we'll be in the trenches studying industry-specific outcomes for some time before we have a complete picture. -->

(11/12) I enjoyed discussing all these issues with @uri_pa in an article and podcast at @globesnews, a leading Israeli business media outlet. And depending on your level of Hebrew, you may be able to enjoy our discussion too --> https://www.globes.co.il/news/article.aspx?did=1001327860

(12/12) Finally, I am sure others have written about this recently and I probably failed to be aware of it, or acknowledge their ideas here, so please accept my apology. Would be happy to hear additional points of view. THE END