competition among the few Flashcards
what is concentration ratio
measures the percentage of total market share held by the largest firms
what is ratio used for
to asses market structure and competitiveness of a firm
importance and dangers of concentration ratios
- degree of competition
- indicate monopoly power
- regulatory oversight
what is degree of competition importance and danger
a rising cr means reduced competition pressures, which leads to higher prices for consumers
what is indicate monopoly power
a high cr highlights potential monopoly power
what is regulatory oversight importance and danger?
high cr indicates a need for regulations to prevent abuse of market power
how to calculate CR
sum of market share % held by largest specified number of firms in a market
if 0%
perfect competition
if less than 50%
low concentration: competitive market
if 50-80
moderate concentration: oligopolistic competition
if more than 80
high concentration, monopolistic market
