1. What is Four-Firm Concentration Ratio?

The four-firm concentration ratio (CR4) measures the market share of the four largest firms in an industry. It's a key indicator of market concentration and competition levels in Australian markets.

2. How Does the Calculator Work?

The calculator uses the CR4 formula:

Where:

• \( sales1 \) — Sales of the largest firm
• \( sales2 \) — Sales of the second largest firm
• \( sales3 \) — Sales of the third largest firm
• \( sales4 \) — Sales of the fourth largest firm
• \( total\_sales \) — Total market sales

Explanation: The ratio shows what percentage of total market sales is controlled by the top four firms.

3. Importance of CR4 Calculation

Details: CR4 is crucial for market analysis, competition assessment, and regulatory decisions. Higher ratios indicate more concentrated markets with less competition.

4. Using the Calculator

Tips: Enter sales figures for the top four firms and total market sales in currency units. All values must be positive, and total sales must be greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What does a high CR4 indicate?
A: A high CR4 (typically above 40%) indicates an oligopolistic market where a few firms dominate the industry.

Q2: How is CR4 used in Australian market analysis?
A: Australian regulators use CR4 to assess market competition levels and potential anti-competitive behavior.

Q3: What are the limitations of CR4?
A: CR4 doesn't account for market size differences, import competition, or potential market entry barriers.

Q4: How often should CR4 be calculated?
A: CR4 should be calculated annually or when significant market changes occur to track concentration trends.

Q5: What's the difference between CR4 and HHI?
A: While CR4 measures top four firms' share, HHI (Herfindahl-Hirschman Index) squares each firm's market share, giving more weight to larger firms.