The aggregate relation between profits and concentration is consistent with Cournot behavior

An important and controversial stylized fact in industrial organization is the positive correlation between industry profit and concentration. One interpretation of this finding is based on the theories of Chamberlin and Stigler, which imply that concentrated industries facilitate collusion. But non-cooperative profit maximizing behavior can also generate a positive correlation. This paper presents an equilibrium model of oligopoly which nests the behavioral assumptions of Bertrand, Cournot, and Chamberlin. Simulations of the model under the Cournot assumption yield regression coefficients for the profits-concentration relation that are very close to the estimated coefficients in the literature.