Concentration Ratios and the Herfindahl-Hirshman Index (HHI)

Market concentration can be defined as the accumulated market shares of companies that will display the scope of how much of the supply of the product is held by the largest business entities. In this regard, there are two significant types of concentration ratios that are utilized at present: concentration ratios and the Herfindahl-Hirschmann Index. Concentration ratios gauge the scope of the market that a particular number of companies possess, specifically the top two four or eight companies.
In essence, these are economic instruments that are used to measure the amount of competition in a particular industry (Jonathan Jacobson, American Bar Association, 2007). The most commonly used concentration ratio is the four firm concentration ratio. This concentration ratio as the portion of the output of one industry that is sold by the four largest companies in that sector. If the industry analysis displays a ratio of 40 percent, then the industry is considered to be competitive. In this view, the degree of competition can be construed in the level of the ratio.
If the ratio is low, then the industry is competitive; if the ratio is high, then the sector is described either to be oligopolistic or monopolistic. The Herfindahl-Hirschmann Index (HHI) calculates the concentration ratios by squaring the market portion of the fifty largest companies in the sector, with the formula as follows: HHI = s12 + s22 + s32 + … + sn2 where the sn value to be established as the market share of the last firm (Investopedia, 2010). References Federal Trade Commission (2010). FTC Order protects consumers in US market for eye care drug used in cataract surgery.

Retrieved August 20, 2010, from http://www. ftc. gov/opa/ 2010/08/novartis. shtm Investopedia ULC. (2010). CFA Level 1-Microeconomics. Retrieved August 20, 2010, from http://www. investopedia. com/exam-guide/cfa-level-1/microeconomics/markets- concentration-measures. asp Jacobson, J. M. , American Bar Association. (2007). Antitrust law developments (6th). Chicago Illinois: ABA Publishing. National Center for Policy Analysis. (2009). Table for concentration ratios. Retrieved August 20, 2010, from http://www. ncpa. org/pub/st259? pg=3

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more