321:
concentration ratios are commonly used. Concentration ratios show the extent of largest firms' market shares in a given industry. Specifically, a concentration ratio close to 0% denotes a low concentration industry, and a concentration ratio near 100% shows that an industry has high concentration.
481:
Concentration ratios can readily be calculated from industry data, but they are a simplistic, single parameter statistic. They can be used to quantify market concentration in a given industry in a relevant and succinct manner, but do not capture all available information about the distribution of
493:
The table below shows the market shares of the largest firms in two different industries (Industry A and
Industry B). Aside from the tabulated market shares for Industry A and Industry B, both industries are the same in terms of the number of firms operating in the industry and their respective
482:
market shares. In particular, the definition of the concentration ratio does not use the market shares of all the firms in the industry and does not account for the distribution of firm size. Also, it does not provide much detail about competitiveness of an industry.
191:
560:
It is evident from these figures that
Industry B is more concentrated than Industry A, since the market share is distributed more heavily towards the more dominant firms. However, Industry A and Industry B both have
642:
319:
290:
88:
431:
374:
218:
258:
238:
568:
ratios of 80%. This shows that the CR ratio does not fully take into account the distribution of market share amongst the most dominant firms.
598:
43:
A concentration ratio (CR) is the sum of the percentage market shares of (a pre-specified number of) the largest firms in an industry. An
682:
677:
455:. An oligopoly describes a market structure which is dominated by a small number of firms each with significant market shares.
687:
614:
662:
588:
73:
47:-firm concentration ratio is a common measure of market structure and shows the combined market share of the
295:
266:
33:
437:
409:
352:
440:
at the least. This is only possible in an industry where there is a very large number of firms.
594:
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market shares. In this example, in both cases, all other firms have a share of less than 10%.
652:
66:
Competition economists and competition authorities typically employ concentration ratios (CR
196:
692:
485:
The following example exposes the aforementioned shortfalls of the concentration ratio.
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Concentration ratios range from 0%–100%. Concentration levels are explained as follows:
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is the number of firms in the industry. That is, all firms have an equal market share.
243:
223:
20:
186:{\displaystyle {\text{CR}}_{n}=C_{1}+C_{2}+\cdots +C_{n}=\sum \limits _{i=1}^{n}C_{i}}
671:
240:
th largest firm in an industry as a percentage of total industry market share, and
37:
16:
Mathematical ratios used to quantify concentration of market shares in industries
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62:
defines the combined market share of the five largest firms in an industry.
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defines the number of firms included in the concentration ratio calculation.
618:
452:
29:
467:
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Perfect competition exists where an industry's concentration ratio is
643:
National
Statistics Economic Trends: Concentration Ratios 2004
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Percentage market shares for two different industries
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246:
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91:
85:The concentration ratio is calculated as follows:
425:
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436:A concentration ratio of close to 0% implies
51:largest firms in the market. For example, if
8:
466:This category ranges from an oligopoly to a
32:, concentration ratios are used to quantify
19:For the chemistry and biology concept, see
76:(HHI) as measures of market concentration.
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451:An industry in this range is likely an
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14:
220:defines the market share of the
314:{\displaystyle {\text{CR}}_{8}}
285:{\displaystyle {\text{CR}}_{4}}
587:Besanko, David (1 July 2017).
1:
36:and are based on companies'
663:Market dominance strategies
426:{\displaystyle {n \over N}}
369:{\displaystyle {n \over N}}
709:
74:Herfindahl-Hirschman Index
18:
683:Macroeconomic indicators
678:Concentration indicators
477:Benefits and shortfalls
593:. Wiley. p. 162.
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40:in a given industry.
590:Economics of Strategy
445:Medium concentration
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213:{\displaystyle C_{i}}
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688:Monopoly (economics)
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347:Perfect competition
339:Concentration Ratio
336:Concentration Level
326:Concentration levels
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267:
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34:market concentration
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460:High concentration
438:perfect competition
621:on 8 December 2018
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404:Low concentration
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600:978-1-119-04231-0
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253:{\displaystyle n}
233:{\displaystyle i}
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653:Herfindahl index
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617:. Archived from
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5:
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658:Microeconomics
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21:Dilution ratio
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38:market shares
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623:. Retrieved
619:the original
615:"IBIS World"
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342:Explanation
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648:Market form
509:Industry B
506:Industry A
463:70% – 100%
81:Calculation
672:Categories
572:References
448:40% – 70%
72:) and the
453:oligopoly
154:∑
134:⋯
30:economics
637:See also
468:monopoly
395:, where
625:21 July
547:Firm 4
536:Firm 3
525:Firm 2
514:Firm 1
489:Example
693:Ratios
597:
433:– 40%
193:where
503:Firm
55:= 5,
627:2017
595:ISBN
553:10%
550:20%
542:10%
539:20%
531:25%
528:20%
520:35%
517:20%
292:and
263:The
28:In
674::
579:^
563:CR
470:.
387:=
380:CR
302:CR
273:CR
95:CR
57:CR
629:.
603:.
566:4
419:N
416:n
397:N
393:N
391:/
389:n
384:n
362:N
359:n
307:8
278:4
248:n
228:i
206:i
202:C
179:i
175:C
169:n
164:1
161:=
158:i
150:=
145:n
141:C
137:+
131:+
126:2
122:C
118:+
113:1
109:C
105:=
100:n
69:n
60:5
53:n
49:n
45:n
23:.
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