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:
“By measuring individual human worth, the novelist reveals the full enormity of the State’s crime when it sets out to crush that individuality.”
—Ian McEwan (b. 1938)
“Talk of a divinity in man! Look at the teamster on the highway, wending to market by day or night; does any divinity stir within him? His highest duty to fodder and water his horses! What is his destiny to him compared with the shipping interests?”
—Henry David Thoreau (1817–1862)
“Just as the French of the nineteenth century invested their surplus capital in a railway-system in the belief that they would make money by it in this life, in the thirteenth they trusted their money to the Queen of Heaven because of their belief in her power to repay it with interest in the life to come.”
—Henry Brooks Adams (1838–1918)