Works in Progress Podcast How to spot a monopoly: Measuring competition
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Apr 17, 2026 A deep dive into new ways to measure competition and spot monopolies. Shortcomings of traditional metrics like concentration and markups get challenged. A breakdown of the Oli-Pekas decomposition shows how markets reallocate customers to more productive firms. Historical examples include auto, telecoms and Colombia’s liberalisation to illustrate real-world effects on competition.
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Concentration And Markups Often Mislead
- Common competition proxies like concentration and markups can mislead regulators about market health.
- Concentration rose nationally as chains spread, yet local competition increased and economies of scale can lower prices despite higher concentration.
Oli Pekas Shows If Markets Reward Productivity
- The Oli-Pekas decomposition measures whether more productive firms gain market share, revealing if markets reward excellence or protect sclerosis.
- It separates technological progress (within-firm productivity) from allocation (who gets market share) using the covariance term.
How Toyota's Gains Needed Customers To Reshape The Market
- Toyota's postwar reforms increased plant efficiency but industry productivity only rose once customers shifted purchases to Japanese cars.
- The covariance rose as Toyota and Honda expanded, showing competition worked by reallocating sales to efficient producers.