Measuring Market Power
Concentration ratios are the most common measures of market power. The four-firm concentration ratio measures the percentage of total industry output attributable to the top four companies. For monopolies the four firm ratio is 100 per cent while the ratio is zero for perfect competition. Another measure of concentration is the Herfindahl-Hirschman Index (HHI) which is calculated by "summing the squares of the percentage market shares of all participants in the market." The HHI index for perfect competition is zero; for monopoly, 10,000. The four firm concentration domestic (U.S) ratios for cigarettes is 93%; for automobiles, 84% and for beer, 85%.
Read more about this topic: Market Power
Famous quotes containing the words measuring, market and/or power:
“Man always made, and still makes, grotesque blunders in selecting and measuring forces, taken at random from the heap, but he never made a mistake in the value he set on the whole, which he symbolized as unity and worshipped as God. To this day, his attitude towards it has never changed, though science can no longer give to force a name.”
—Henry Brooks Adams (1838–1918)
“... married women work and neglect their children because the duties of the homemaker become so depreciated that women feel compelled to take a job in order to hold the respect of the community. It is one thing if women work, as many of them must, to help support the family. It is quite another thing—it is destructive of woman’s freedom—if society forces her out of the home and into the labor market in order that she may respect herself and gain the respect of others.”
—Agnes E. Meyer (1887–1970)
“There is a power in love to divine another’s destiny better than that other can, and, by heroic engagements, hold him to his task.”
—Ralph Waldo Emerson (1803–1882)