1. What Is Concentration Ratio Calculator?

The Concentration Ratio (CR) calculator measures market concentration by calculating the percentage of market share held by the largest firms in an industry. It provides insights into market structure and competition levels.

2. How Does the Calculator Work?

The calculator uses the Concentration Ratio formula:

Where:

• \( sum\_top\_firms \) — Combined market share of top firms (units)
• \( total\_market \) — Total market size (units)

Explanation: The equation calculates the percentage of total market controlled by the largest firms, indicating market concentration level.

3. Importance of Concentration Ratio Calculation

Details: Concentration ratio is crucial for market analysis, antitrust regulation, and understanding competitive dynamics in various industries.

4. Using the Calculator

Tips: Enter the combined market share of top firms and total market size in consistent units. Both values must be positive numbers, with sum of top firms not exceeding total market.

5. Frequently Asked Questions (FAQ)

Q1: What does a high concentration ratio indicate?
A: A high CR indicates an oligopolistic market structure where a few firms dominate the market, potentially reducing competition.

Q2: What are typical concentration ratio thresholds?
A: CR4 below 40% indicates competitive market, 40-60% indicates moderate concentration, and above 60% indicates high concentration.

Q3: How is this different from HHI index?
A: Concentration ratio is simpler but less sensitive to market share distribution than Herfindahl-Hirschman Index (HHI).

Q4: What are the limitations of concentration ratio?
A: It doesn't account for market share distribution among top firms or potential competition from foreign markets.

Q5: When should concentration ratio be used?
A: Useful for quick market structure assessment, regulatory analysis, and preliminary competitive analysis in various industries.