The concentration of local markets: A study of accounting, advertising and law

Published market concentration statistics have aroused concerns that industry leaders may have monopolized the U.S. accounting market. Using the law and advertising service industries as benchmarks, this paper analyzes local (single Metropolitan Statistical Area) concentration measures. Consistent with national measures, the average local concentration measures indicate that accounting is statistically more concentrated than law or advertising. However, the relative difference between accounting and the benchmark advertising and law concentration measures declines considerably as one moves from the national to the local level. Moreover, accounting is statistically more concentrated than law or advertising only in the largest local markets; concentration measures of the three service industries are not statistically different in smaller local markets. These results are consistent with large discretionary expenditures (e.g., training, research and development, advertising) in accounting relative to advertising or law. Our findings suggest that, in smaller local markets, accounting is not more prone to collusion than other professional services. The results also suggest an important difference in the market structure of accounting and other service industries.