The answer is economies of scale. Banks, for instance, have significant economies of scale. Bigger banks can lend for lower rates and offer better services over

The answer is economies of scale. Banks, for instance, have significant economies of scale. Bigger banks can lend for lower rates and offer better services overall. Ironically bigger banks are also safer [1]. So economists have to weigh the disadvantages of oligopolies against the advantage of efficient production. For instance you wouldn't want several electric grids competing against each other. On the other hand oligopolies can have powerful lobbies distorting the political process. It's a complex balancing act overall. If you're interested, this is a field of economics called "industrial organization". 1. Canada, for instance, has only 6 banks, none of which failed in 2008. The problem with banks is their being over-leveraged (that is taking excessive risks) and inter-connectedness, as well as human shortsightedness and managerial incentives encouraging excessive risk taking. The problem with large banks is generally their political power.