The four-firm concentration ratio for a given industry is the sum of the market share percentages of that industry’s four largest firms in general, a concentration ratio measures the total output, in terms of market share, for a given number of firms at the top of a given industry. The four-firm ratio is often held to indicate the form or structure of a market in respect of competition (ie whether it takes the form of monopolistic competition, oligopoly, or monopoly) a concentration ratio of over 40%, for example, is usually held to indicate an oligopoly. The four-firm concentration ratio is calculated by adding the market shares of the four largest firms: in this case, 16 + 10 + 8 + 6 = 40 this concentration ratio would not be considered especially high, because the largest four firms have less than half the market. The four-firm concentration ratio measures the percentage of total industry output attributable to the top four companies for monopolies the four firm ratio is 100 per cent while the ratio is zero for perfect competition the four firm concentration domestic (us) ratios for cigarettes is 93% for automobiles, 84% and for beer, 85%. The four-firm concentration ratio is an analytic tool that helps industry experts and government regulators to assess the state of competition in a market.
In a specification that does not include firm market share, cotterill reports (p 385) that the four-firm concentration ratio is positively and significantly related to grocery prices (t-ratio of 27. While the m-firm concentration ratio adds market shares of a small number of firms in the market, the so-called herfindahl index (also known as herfindahl–hirschman index) considers the full distribution of market shares. I ndustrial concentration occurs when a small number of companies sell a large percentage of an industry's product the most widely used measure of concentration is the so-called four-firm concentration ratio, which is the percentage of the industry's product sold by the four largest producers.
The four-firm sales concentration ratio for an industry measures the: a) geographic concentration of firms b) extent to which the four largest firms dominate the production of a good c) percentage of the industry's capital facilities owned by the four largest firms. A four-firm concentration ratio over 90 (that is, 90 percent of industry output is produced by the four largest firms) is a good indication of oligopoly and that these four firms have significant market control. Some concentration ratios from the 2002 survey, the latest available, are reported in table 111 “concentration ratios and herfindahl–hirschman indexes” notice that the four-firm concentration ratio for breakfast cereals is 78% for ice cream it is 48. N-firm concentration ratio is a common measure of market structure and shows the combined market share of the n largest firms in the market for example, the 5-firm concentration ratio in the uk pesticide industry is 075, which indicates that the combined market share of the five largest pesticide sellers in the uk is about 75.
Ans: a four-firm concentration ration of 60 % means the largest four firms in an industry account for 60 % of sales a four-firm concentration ratio of 90 % means the largest four firms account for 90 percent of sales. From the concentration ratio, it is impossible to determine the amount accounted for by the top ranked companies the herfindahl-hirschman index would provide an insight to this determination if each of the top 50 companies accounted for 2 percentage points of the 100 percent, the index would be 200. The percentage of market share taken up by the largest firms it could be a 3 firm concentration ratio (market share of 3 biggest) or a 5 firm concentration ratio concentration ratios are used to determine the market structure and competitiveness of the market for example, an oligopoly is defined.
The three-firm concentration ratio fro the beverage industry is 80% (30% + 30% + 20%) herfindahl index another measure of concentration in an industry can be expressed using the herfindahl index. The superior quality and accuracy of the herfindahl index over the simple concentration ratio can be seen when three markets are examined each with a four firm concentration ratio of 85% assume that in each market the remaining 15% of the market is controlled by 15 firms each with 1% market share. Two four-firm industries, one containing equalsized firms each accounting for 25 percent of total sales, the other with market shares of 97, 1, 1, and 1, have the same four-firm concentration ratio (100) but very different hhis (2,500 versus 9,412.
Firm market share nokia 36% fujitsu 3% kyocera 3% lg 6% motorola 16% samsung 6% sanyo 4% siemens 7% sony ericsson 11% plus 8 more firms with 1% each based on this information, the four-firm concentration ratio is 70 city gas is a natural monopoly that supplies natural gas to a particular city. Three- and four-firm concentration ratios (namely the top three shares) insure a high correlation a p roper fomu lation (eg, between the three-firm ratio and the fourth share), he predicted, wo uld reveal a vastly lower correlation sch malensee (1976) devised twelve more or less pl ausible concentration in dices. The concentration ratio is the percentage of market share owned by the largest m firms in an industry, where m is a specified number of firms, often 4, but sometimes a larger or smaller number the concentration ratio often is expressed as cr m , for example, cr 4. Econ chapter 14 study play oligopoly few firms four firm concentration ratio benefit of four firm concentration ratio provides a good general idea of the exact competition in an industry barrier to entry anything that keeps new firms from entry where they earning economic profits.