Strategy Choices of Firms and Market Concentration

This paper suggests a new approach to the empirical analysis of market structure. Market concentration is an aspect of distribution of market shares of firms, and market shares are best modelled at the firm level, bringing into play strategy choices made by firms. It follows that a useful approach to explaining concentration would be a two stage one: to estimate firm size or market shares as a function of firm level determinant, and use the information in these estimates to assess the relative contributions of firm characteristics to concentration. The method is illustrated by application to selected Polish manufacturing industries in the early transition period.