What is one effect of having a high concentration of suppliers in an industry?

A high concentration of suppliers in an industry tends to increase the bargaining power of suppliers over buyers for several reasons. When there are fewer suppliers, they often have more control over pricing, terms, and availability of their products or services. This can lead to a situation where buyers become more dependent on these suppliers for their needs since the alternatives may be limited. As a result, suppliers can impose more favorable terms and conditions for themselves, such as higher prices or stricter delivery schedules.

In contrast, a lower concentration of suppliers typically empowers buyers to negotiate better deals, as the presence of many suppliers increases competition. Furthermore, the scenario where there is a high concentration of suppliers does not directly relate to the encouragement of competition among those suppliers, which tends to happen when there is a larger pool of potential suppliers. Similarly, while it may affect product quality, this relationship is not as straightforward as the direct impact on bargaining power. Therefore, the most accurate understanding of the dynamics at play is that a high concentration of suppliers leads to an increase in their bargaining power over buyers.