Welfare Implications of Oligopoly in U.S. Food Manufacturing

A statistical procedure is used to show that increased concentration in U.S. food‐manufacturing industries is associated with increased total input productivity. A price leadership model is employed in order to estimate total welfare loss. If an elasticity of −1 is assumed, deadweight loss to society is estimated at 0.5% of food value. If an elasticity of −0.5 is assumed, total loss to consumers amounts to 6.11% of food value, which is $‐10 billion in 1975. The increase in total factor productivity which is linked to concentration is roughly sufficient to offset the entire loss to consumers.