This study examines the importance of economies of scale in measuring the concentration-profits relationship. Firms are grouped into industries facilitating within industry analyses. Replacement cost disclosures are utilized to evaluate any price change bias resulting from the use of traditional accounting statements.
This study produces no indication of economies of scale in high or low concentration industries. In medium concentration industries there is a weak tendency for larger firms to have higher returns. This result cannot, however, be attributed to scale economies. Observed replacement cost price adjustments are not randomly distributed across firms.
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