  We study firms' strategic interactions when each firm may own multiple
production technologies, each with its own marginal cost and capacity.
Increasing industry concentration by reallocating non-efficient capacity to the
largest and most efficient firm can decrease market prices as it incentivizes
the firm to outcompete its rivals. However, with large reallocations, the
standard monotonic relationship between concentration and prices re-emerges as
competition weakens due to the rival's lower capacity. Thus, we demonstrate a
U-shaped relationship between market prices and industry concentration when
firms are diversified. This result does not rely on economies of scale or
scope. We find consistent evidence from the Colombian wholesale energy market,
where strategic firms are diversified with fossil-fuel and renewable
technologies, exploiting exogenous variation in renewable capacities. Our
findings not only apply to the green transition but also to other industries
and suggest new insights for antitrust policies.
