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Four-firm concentration ratio

AnalyticsTrade Team
AnalyticsTrade Team Last updated on 26 Apr 2023

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Four-Firm Concentration Ratio

The four-firm concentration ratio is a measure of the market share of the four largest firms in an industry. It is calculated by adding the market share of the four largest firms in the industry and dividing the sum by the total market share of all firms in the industry. The four-firm concentration ratio is used to measure the level of competition in an industry and is an important indicator of the degree of market power held by the four largest firms.

History of the Term

The four-firm concentration ratio was first developed by economist Edward Chamberlin in 1933. Chamberlin was interested in understanding the effects of market structure on competition and developed the four-firm concentration ratio as a way to measure the degree of market power held by the four largest firms in an industry. The four-firm concentration ratio has since become an important tool for economists and policy makers to measure the level of competition in an industry.

Comparison Table

Industry Four-Firm Concentration Ratio
Automobile Manufacturing 0.77
Retail Grocery Stores 0.45
Pharmaceuticals 0.90
Airlines 0.72

Summary

The four-firm concentration ratio is a measure of the market share of the four largest firms in an industry. It is used to measure the level of competition in an industry and is an important indicator of the degree of market power held by the four largest firms. The four-firm concentration ratio was first developed by economist Edward Chamberlin in 1933 and has since become an important tool for economists and policy makers to measure the level of competition in an industry. For more information about the four-firm concentration ratio, please visit the websites of the Federal Trade Commission, the U.S. Department of Justice, and the Bureau of Economic Analysis.

See Also

  • Herfindahl-Hirschman Index
  • Market Share
  • Market Structure
  • Competition
  • Monopoly
  • Oligopoly
  • Duopoly
  • Monopolistic Competition
  • Perfect Competition
  • Price Discrimination

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