Concentration Ratio

In economics, a concentration ratio is a measure of the total output produced in an industry by a given number of firms in the industry. The most common concentration ratios are the CR₄ and the CR₈, which means the market share of the four and the eight largest firms. Concentration ratios are usually used to show the extent of market control of the largest firms in the industry and to illustrate the degree to which an industry is oligopolistic.

The standard tools of competition economists and competition authorities to measure market concentration are the Herfindahl index (HHI) and the concentration ratios (CR(n)). These two are known as the traditional structural measures of market concentration (based on market shares). The concentration of firms in an industry is of interest to economists, business strategists and government agencies.