Nature of Competition in Fluid Milk Markets: Market Organization and Concentration

Excerpts from the report Highlights: The typical city milk market today has two important characteristics: (1) A few firms make most of the sales, and (2) small milk dealers are going out of business. These characteristics have been apt descriptions for over 50 years. Studies of city markets 50 years ago showed that 2 to 6 firms controlled 40 to 60 percent of the market, as they frequently do today. The number of handlers in fluid milk markets has been declining since early in the 19th century because of technological and economic changes. Between 1950 and 1962, the number of handlers decreased nearly half in the 71 markets studied, declining at a faster rate in the smaller markets than in the largest ones. Concentration--the share of the market held by the 4 largest firms--increased fairly rapidly in smaller markets in this period, while it declined slightly in the largest markets. Over a 25- to 30-year period, between the 1930’s and 1962, concentration increased fairly sharply in the smallest markets, while it declined in the majority of the larger ones.