The concentration of industries affects the total welfare of the economy and changes its distribution among all economic agents. This paper examines an entire supply chain that includes multiple stages within the cheese industry. It presents the effect of market concentration levels on prices, quantities, profits, consumer surplus and the total welfare of all sectors involved in the production and consumption processes. Since increased concentration may lead to a higher degree of inequality, the relationship between inequality and efficiency is investigated. These issues are demonstrated by using a simplified structure of the cheese industry.
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- Herfindahl-Hirschman index
- Supply chain