Thursday, October 8, 2009

Concentration Ratios

In my Industry Analysis (ECON 3350) course at Iowa we were recently talking about industry concentration, and how it can be measured. One method of measuring industry concentration is to use an n-firm concentration ratio, where n is for a specific number of firms. Thus, if you wanted to find out what the 4-firm concentration ratio was for an industry, you would rank all the firms in the industry by market share from highest to lowest and then add the market shares of the (in this case) largest 4 firms.

I mentioned mobile phones in class and just found some data from the Financial Times from earlier this year on global market share of mobile phones (and smartphones). From the graph it looks like the top four mobile phone firms (market share) are Nokia (38%), Samsung (17%), Sony-Erikson (8%), Motorola (8%). Thus the 4 firm concentration ratio in the global market for mobile phones as of the 3rd quarter in 2008 is 71%, making mobile phones a relatively concentrated global market.

Also, here is an article on US automobile market share, and we see from the article that the 4-firm concentration ratio as of September 2008 was 67.3%, which is also a relatively concentrated market.

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