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. Economics

    A social science that studies how individuals, governments, firms ...
  3. Microeconomics

    The branch of economics that analyzes the market behavior of ...
  4. Oligopoly

    A situation in which a particular market is controlled by a small ...
  5. Monopoly

    A situation in which a single company or group owns all or nearly ...
  6. Herfindahl-Hirschman Index - HHI

    A commonly accepted measure of market concentration. It is calculated ...
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. Investing

    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 government decisions. Macroeconomics and microeconomics, and their wide ...
  5. Options & Futures

    Henry Ford: Industry Mogul And Industrial Innovator

    This man made his dream of bringing the automobile to the masses a reality.
  6. Economics

    Can Internet companies be vertically integrated?

    Find out how online businesses are beginning to take advantage of vertical integration for many of the same reasons as traditional businesses.
  7. Trading Strategies

    How can retirees protect their wealth in a bear market?

    Look at some helpful hints about how to protect your retirement nest egg when the stock market is underperforming or the economy is in recession.
  8. Taxes

    Can you write variable costs off your taxes?

    Learn if you can deduct variable or fixed costs from your business taxes and learn more about business deductions, cost of goods sold and gross profit.
  9. Investing Basics

    What is the effect of price inelasticity on demand?

    Find out why price inelasticity of demand shows the relationship between demand and price if the price of an inelastic good is either lowered or raised.
  10. Options & Futures

    What is the difference between inelasticity and elasticity of demand?

    Find out how elasticity of demand and inelasticity of demand are two sides of the same coin, based on the calculated elasticity quotient.

You May Also Like

Hot Definitions
  1. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  2. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  3. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  4. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  5. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  6. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
Trading Center