T O P

Strictly from the perspective of the efficient use of resources, is it not better to have a small number of large companies rather than a large number of small businesses doing the same thing?

Strictly from the perspective of the efficient use of resources, is it not better to have a small number of large companies rather than a large number of small businesses doing the same thing?

Seblins

Smaller business has more flexibility and can adjust more quickly for market change while large business can mitigate risks by burning capital.


Various_Mobile4767

Not necessarily. Small numbers of large companies mean that these companies hold market power. They will be allowed to charge higher prices and produce at a lower quantity than what would otherwise be efficient. Furthermore, large companies may be too large to be productively efficient in the industry that they're operating in. On the other hand, many small companies may be too small to be reach their minimum efficient scale. For example, its probably more cost efficient(ignoring other relevant factors) for one large factory that produces cars than 100 smaller factories with all their own staff, buildings and machines. Also, larger companies have access to more capital which means they can put more money into research and development, which may lead to higher efficiency in the future.