Calculate and interperate Concentration
Ratios
I N firm concentration Ratio
To calculate we take N firms and determine how
much of the market
quantity they control
Example
If it is
given that a firm in a market produced the
following proportions of market Q
1590
1296
11 S firm concentration
10
is tht 11 til to
3599g
990
99 doesn't pick up distribution distances
990
8
6
, 2 Hirfendahl Hirschman index
This is a market concentrates that does account
for changes in firm size
Simply square the market
H Csis percentage and add them
UP
Si market shoe of the 8mm 0 100
note t in the H index are interpreted as increases in
concentration decease in competition and increase in firm's
market power
Always use
decimals
Final
note
Markets with one firm dominating is more concentrated
and there is more power to mark price up over me
hager Does
H below 0.01 highly competition market
G H below O I unconcerntrated market
H between CO I 0.18
moderately concentrated
G H abac 0.18 7 highly market
Concentrated market
Ratios
I N firm concentration Ratio
To calculate we take N firms and determine how
much of the market
quantity they control
Example
If it is
given that a firm in a market produced the
following proportions of market Q
1590
1296
11 S firm concentration
10
is tht 11 til to
3599g
990
99 doesn't pick up distribution distances
990
8
6
, 2 Hirfendahl Hirschman index
This is a market concentrates that does account
for changes in firm size
Simply square the market
H Csis percentage and add them
UP
Si market shoe of the 8mm 0 100
note t in the H index are interpreted as increases in
concentration decease in competition and increase in firm's
market power
Always use
decimals
Final
note
Markets with one firm dominating is more concentrated
and there is more power to mark price up over me
hager Does
H below 0.01 highly competition market
G H below O I unconcerntrated market
H between CO I 0.18
moderately concentrated
G H abac 0.18 7 highly market
Concentrated market
