Concentration Ratio

AAA

DEFINITION of 'Concentration Ratio'

In economics, a ratio that indicates the relative 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 than one with a ratio nearing 100%, which would be evident in an industry characterized by a true monopoly.

INVESTOPEDIA EXPLAINS 'Concentration Ratio'

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 (expressed as a percentage) of the four largest firms in an industry, is a commonly used concentration ratio. The Herfindahl index, another indicator of firm size, has a fair amount of correlation to the concentration ratio.

RELATED TERMS
  1. Perfect Competition

    A market structure in which the following five criteria are met: ...
  2. Microeconomics

    The branch of economics that analyzes the market behavior of ...
  3. Monopoly

    A situation in which a single company or group owns all or nearly ...
  4. Dog Eat Dog

    Intense competition in a market. Dog eat dog competition most ...
  5. Oligopoly

    A situation in which a particular market is controlled by a small ...
  6. Herfindahl-Hirschman Index - HHI

    A commonly accepted measure of market concentration. It is calculated ...
RELATED FAQS
  1. What's the difference between macroeconomics and microeconomics?

    Microeconomics is generally the study of individuals and business decisions, macroeconomics looks at higher up country and ... Read Full Answer >>
Related Articles
  1. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  2. Investing Basics

    Analyze Investments Quickly With Ratios

    Make informed decisions about your investments with these easy equations.
  3. Forex Education

    Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
  4. Options & Futures

    Henry Ford: Industry Mogul And Industrial Innovator

    This man made his dream of bringing the automobile to the masses a reality.
  5. Personal Finance

    What Drives Consumer Demand for Tesla?

    Tesla did not invent the electric vehicle market, but it has brought to it elements of luxury and elite status. But what really drives demand for Teslas?
  6. Economics

    How A Limited Government Affects A Country's Finances

    Countries with limited governments have fewer laws about what individuals and businesses can and can’t do. What's the net result?
  7. Investing Basics

    How Does Goodwill Affect Financial Statements?

    Goodwill is a bit of a paradox--intangible, yet it is recorded as an asset on the purchasing company's balance sheet.
  8. Investing Basics

    Using Normal Distribution Formula To Optimize Your Portfolio

    Normal or bell curve distribution can be used in portfolio theory to help portfolio managers maximize return and minimize risk.
  9. Investing Basics

    R-Squared

    Learn more about this statistical measurement used to represent movement between a security and its benchmark.
  10. Insurance

    The Government And Risk: A Love-Hate Relationship

    Though the U.S. government can help its citizens by subsidizing risky loans, the costs always come back to the taxpayers.

You May Also Like

Hot Definitions
  1. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  2. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  5. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  6. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
Trading Center