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In economics, the concentration ratio of an industry is used as an indicator of the relative size of firms in relation to the industry as a whole. This may also assist in determining the market form of the industry. One commonly used concentration ratio is the four-firm concentration ratio, which consists of the market share, as a percentage, of the four largest firms in the industry. In general, the N-firm concentration ratio is the percentage of market output generated by the N largest firms in the industry. Image File history File links Gnome-globe. ... This article needs additional references or sources for verification. ... Corporate redirects here. ... In microeconomics, the main criteria by which one can distinguish between different market forms are: the number and size of producers and consumers in the market, the type of goods and services being traded, and the degree to which information can flow freely. ... Market share, in strategic management and marketing, is the percentage or proportion of the total available market or market segment that is being serviced by a company. ...

The concentration ratio has a fair amount of correlation to the Herfindahl index, another indicator of firm size. In economics, the Herfindahl index, also known as Herfindahl-Hirschman Index or HHI, is a measure of the size of firms in relationship to the industry and an indicator of the amount of competition among them. ...

Some examples of the four-firm concentration ratio include:^{[citation needed]}

• Traditional agriculture: Less than 5%
• Sheet metal: 9%
• Asphalt paving: 15%
• Typesetting: 16%
• Publishing: 23%
• Soap and detergents: 63%
• Men's slacks: 75%
• Aircraft: 79%
• Greeting cards: 84%
• Cigarettes: 99%

Market forms can often be classified by their concentration ratio. Listed, in ascending firm size, they are:

• Perfect competition, with a very low concentration ratio,
• Monopolistic competition, below 40% for the four-firm measurement,
• Oligopoly, above 40% for the four-firm measurement, (Example automobile manufacturers)
• Monopoly, with a near-100% four-firm measurement.

Perfect competition is an economic model that describes a hypothetical market form in which no producer or consumer has the market power to influence prices. ... Monopolistic competition is a common market form. ... An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). ... A monopoly (from the Greek language monos, one + polein, to sell) is defined as a persistent market situation where there is only one provider of a product or service, in other words a firm that has no competitors in its industry. ...

See also

• Market form
• Herfindahl index
• Microeconomics
• Market dominance strategies