THE JOURNAL OF LAW AND ECONOMICS gether indicate a nonlinear, decreasing impact of concentration on relative rates of return as the size of the smaller firms is increased from r, to r3. The competitive view of industry structure suggests that rapid changes in concentration are brought about by changed cost conditions and not by al terations in the height of entry barriers. Industries experiencing rapid in- creases in concentration should exhibit greater disparities between large and small rates of return because of the more significant cost differences which the root cause of rapid alternations in industry structure. The monopoly view of concentration does not imply such a relationship for if an industry is rapidly achieving workable collusive practices there is no reason to suppose that the difference between large and small firm profit rates should increase. At the time of writing, matching data on concentration were available for both 1963 and 1967. This time span is too short to reveal much variation in concentration ratios, and so we cannot be very confident about evidence gained by regressing differences in profit rates on changes in concentration ratios. However, the persistently positive coefficient of the variable Cer-Ces tly the rates of return for this asset size class, as, of course, he case, no correlation between concentration and rate of return was produced. es of return so calculated were virtually perfectly correlated with the rates of shown above for this asset size (2)The asset size categories used to calculate the above data are uniform over all in rms in the largest asset size category, and these were dropped from the sample. An alternative me mpact of this procedure. For each industry, the largest asset size class was redefined so as to include some firms in every industry. The mechanics of the pi tegorize asset sizes more finely and choose the largest three size categories containing stry, and the rate of return for these firms was then compared to those firms con- tained in the three smaller asset size categories containing some observations, The ghted average difference between large firm rate of return, RL, and small firm rate of return, Rs, compared with industry concentration is shown below. This table is sistent with the text tables 7.0 over 140 (3) The e argument suggests that for a given degree of industry concentration atIo nd the sizes of the smallest firms, the between R4 and Rl. A linear regression of R-Ri on Ce and the ave average asset size of firms in the R4 class. " Also, there was a small reduction in the significance of the coefficient of C