The Dynamics of Changing Seller Concentration

SELLER concentration-the market share of the largest n firms-is a normatively important summary statistic taken from the upper tail of the size distribution of an industry's firms.' In this paper we report an attempt to expose the dynamic process by which disturbances affect seller concentration. If a structural disturbance changes the rate at which new (small) firms enter an industry, for example, its full effect on top-end concentration will appear only as and when these entrants consolidate their positions and achieve equilibrium shares in the industry. We investigate changes in concentration in United States four-digit manufacturing industries observed in successive censuses-I954, I958, I963, I967, and I972. We also set forth some provocative descriptive statistics on changes in concentration.