Home
Back
Concentration Ratio Formula:
| From: | To: |
The Concentration Ratio (CR) is a measure used in economics to show the extent of market control held by a certain number of firms in an industry. It's calculated as the sum of market shares of the largest firms in the market.
The calculator uses the Concentration Ratio formula:
Where:
Explanation: The calculator sums all the market share percentages you provide to determine the total market concentration.
Details: Concentration ratios help economists and policymakers understand the competitive structure of markets. Higher ratios indicate more concentrated markets with less competition, while lower ratios suggest more competitive markets.
Tips: Enter market shares as percentages separated by commas (e.g., "30,25,20,15"). The calculator will automatically sum all values to calculate the concentration ratio.
Q1: What does a high concentration ratio indicate?
A: A high CR indicates that a small number of firms control a large portion of the market, which may suggest an oligopoly or monopoly situation.
Q2: What are common CR measurements used in economics?
A: Common measurements include CR4 (sum of top 4 firms' market shares) and CR8 (sum of top 8 firms' market shares).
Q3: How is concentration ratio different from HHI?
A: While CR simply sums market shares, the Herfindahl-Hirschman Index (HHI) squares each firm's market share before summing them, giving more weight to larger firms.
Q4: What is considered a highly concentrated market?
A: Markets with CR4 above 60% or CR8 above 85% are generally considered highly concentrated.
Q5: What are the limitations of concentration ratio?
A: CR doesn't account for market share distribution among the top firms or potential competition from foreign firms or substitute products.