Industry and Economic

Powerful Essays
2703 Words
Grammar
Plagiarism
Writing
Score
Industry and Economic
Calculating the Four Firm Concentration Ratio (CR4)

Definition: The four firm concentration ratio is the percentage of market share held by the largest 4 firms in an industry.

Formula: CR4= Σ4i=1 si
Calculation: (11,834,883 + 3,845,900 + 3,696,800 + 3,650,647) / 44,582,621 = 0.5165292996 = 0.516 (3dp) =51%

Analysis: As the four firm concentration ratio is >50% this insinuates that this market structure is that of an oligopoly.

Calculating the Herfindahl-Hirschman Index (HHI)

Definition: The HHI is a concentration measure based on the sum of the squared market shares of all the firms in the industry.

Formula:

Calculation: 0.1085 (4dp)

Analysis: Using HHI analysis, we have found the HHI is between 100 and 1500, resulting in it being an unconcentrated market

Lorenz Curve and Gini Coefficient

Gini Formula:

Calculation: G = (458069882/0.5*197*44582621) – 1 = -0.89569 (0.89 2DP)

Narrowing down the market by using an ‘n’ number of firms as a measure of industry concentration is helpful for measuring concentration in extreme cases like monopoly and perfect competition. White (1981) argues that in the case of concentration within individual markets, we search for inferences in relation to the likelihood of oligopolistic coordination concerning prices and sales. The shares of the oligopoly’s themselves will be a prime determinant of the likelihood of that co-ordination, Hence, industry sales are the proper measure of concentration calculations in individual industries.

Using CR4 means that analysis of the whole industry is based on these select four, meaning it cannot capture information and performance in the rest of the industry. No account is taken of the number and size distribution of firms that are outside the top ‘n’. Furthermore, no account is taken of the size distribution

You May Also Find These Documents Helpful

• Good Essays

The four-firm concentration ratio is an indicator of the size (as measured by output or sales) of the four largest firms within an industry, compared to the output of the entire industry. It is determined as follows:…

• 457 Words
• 3 Pages
Good Essays
• Satisfactory Essays

five-firm concentration ratio measures the combined market share of the leading five firms in the market. If…

• 932 Words
• 4 Pages
Satisfactory Essays
• Good Essays

d How do opportunity cost, explicit cost, implicit cost, accounting profit and economic profit relate to each other? (4 marks)…

• 2534 Words
• 17 Pages
Good Essays
• Good Essays

Oligopoly is a very common market form where the sellers are so small in numbers that the actions of any one of them would affect the cost of the products and competition would significantly visible. “Oligopoly is defined as an industry dominated by few firms that, by virtue of their individual sizes are large enough to influence the market price” (Case, Fair, Oster, 2009). These companies are very common when it is carefully observed and measured. The competition would be seriously to do business in a better fashion. In oligopoly concentration ratios are measured, implemented and documented by unites. Each oligopolist is likely to be aware of the actions of the others because of the smaller area of activities. Large companies use concentration ratios to measure the share of industry position according to the current situation. The large company of the women’s and girl’s that make dresses, fluid milk industry, envelope for mailing and computers suppliers would be discovered in this paper to determine if they meet the objectives of oligopoly.…

• 872 Words
• 4 Pages
Good Essays
• Satisfactory Essays

| d. one firm usually dominates in terms of market share, size, or value of assets.…

• 1643 Words
• 7 Pages
Satisfactory Essays
• Powerful Essays

production and left most of the work to the men. There is a lot of evidence that would lead…

• 1224 Words
• 1 Page
Powerful Essays
• Good Essays

Industry structure is often measured by computing the Four-Firm Concentration Ratio. The concentration ratio of an industry is used as an indicator of the relative size of firms in relation to the industry as a whole. This may also assist in determining the market form of the industry. One commonly used concentration ratio is the four-firm concentration ratio, which consists of the market share, as a percentage, of the four largest firms in the industry.…

• 831 Words
• 4 Pages
Good Essays
• Satisfactory Essays

The Industrial Revolution began in England during the eighteenth century. This was the shift from making goods by hand to making them by machine. Some might argue that Industrialization had negative consequences on soceity because of the lack of labor laws, however, it was actually a positive thing for socitey. Industrialization's positive effects include increace in work and an increase in production.…

• 422 Words
• 2 Pages
Satisfactory Essays
• Powerful Essays

Industrialization

• 2614 Words
• 11 Pages

B.12.9 Select significant changes caused by technology, industrialization, urbanization, and population growth, and analyze the effects of these changes in the United States and the world.…

• 2614 Words
• 11 Pages
Powerful Essays
• Good Essays

Cement Industy

• 785 Words
• 4 Pages

• Herfindahl-Hirschman Index (HHI) -This index calculates the sum of the percentage market share of all the firms in the industry. A lower HHI number suggests higher levels of competition and vice-versa. The HHI number addresses issues like market shares and competition amongst the large firms.…

• 785 Words
• 4 Pages
Good Essays
• Powerful Essays

Overall, the higher the ratio the better the performance for the company, but this number cannot be compared outside of the industry or makes for a poor comparison. Thus, in regards to understanding, the comparison has been made against the four companies above, but theoretically one could not make this comparison in an actual analysis. In comparing them, the top two are Walmart and Home Depot.…

• 1780 Words
• 8 Pages
Powerful Essays
• Good Essays

ratios are used to measure the total market share of the four largest firms in an industry. The…

• 707 Words
• 3 Pages
Good Essays
• Satisfactory Essays

Part I: The Intellectual Underpinnings of Industrialization – Read the following documents and answer the questions below.…

• 863 Words
• 4 Pages
Satisfactory Essays
• Good Essays

Economists use concentration ratio to measure the degree of concentration in a market, computed as the percentage of the market output produced by the largest firms (O’Sullivan, Sheffrin, & Perez. 2008). One of predominantly concentration ratio used is the Four Firm Concentration Ratio. Four Firm Concentration Ratio isthe percentage of total output in a market produced by the four largest firms.…

• 663 Words
• 3 Pages
Good Essays
• Satisfactory Essays

The ratios used in a comparative analysis also depend on the industry the company and peer group that are being analyzed. Many times a “sub-market” index will be used to represent the entire sector as “the market.…

• 421 Words
• 2 Pages
Satisfactory Essays