Discussion of 'The ‘Matthew Effect’ and ‘Market Concentration: Search Complementarities and Monopsony Power’

The last decades have seen a significant increase in the concentration of economic activity. Firms are getting bigger and the top firms account for a larger and larger share of employment and sales. The paper The ‘Matthew effect’ and market concentration: Search complementarities and monopsony Power provides a novel and intriguing take on these patterns. It starts from the premise that production is subject to search frictions. Producing firms need to find retailers to sell their goods to consumers. Similarly, retailers need to find producers to actually have something to sell. Crucially, both producers and retailers can decide on their search effort and search more intensely if the return of doing so is large.