Definition of Concentration ratio:
Percentage market share attributable to a given number of the largest firms in an industry. For example, CR4 means the market share of the largest four firms, and CR10 means that of ten largest firms.
The concentration ratio indicates whether an industry is comprised of a few large firms or many small firms. The four-firm concentration ratio, which consists of the market share of the four largest firms in an industry, expressed as a percentage, is a commonly used concentration ratio. Similar to the four-firm concentration ratio, the eight-firm concentration ratio is calculated for the market share of the eight largest firms in an industry. The three-firm and five-firm are two more concentration ratios that can be used.
The concentration ratio, in economics, is a ratio that indicates the size of firms in relation to their industry as a whole. Low concentration ratio in an industry would indicate greater competition among the firms in that industry, compared to one with a ratio nearing 100%, which would be evident in an industry characterized by a true monopoly.
How to use Concentration ratio in a sentence?
- The concentration ratio compares the size of firms in relation to their industry as a whole.
- Low concentration ratio indicates greater competition in an industry, compared to one with a ratio nearing 100%, which would be a monopoly.
- An oligopoly is apparent when the top five firms in the market account for more than 60% of total market sales, according to the concentration ratio.
Meaning of Concentration ratio & Concentration ratio Definition