theme 3 : concentration ratios

concentration ratio definition

measures the number of firms who account for a proportion of the total market share

what is the most popular way of measuring market share

total sales

how to work out concentration ratio

• add up the % of each firm’s market share

• can only work it out if you have details of how large each firm is

when is the concentration ratio likely to be high

• in narrowly defined market

• i.e. in specific markets

high concentration ratio vs low concentration ratio

• a high concentration ratio has a small number of firms

• a low concentration ratio has a large number of firms

• horizontal integration will make a smaller number of firms