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)
“To throw obstacles in the way of a complete education is like putting out the eyes; to deny the rights of property is like cutting off the hands. To refuse political equality is like robbing the ostracized of all self-respect, of credit in the market place, of recompense in the world of work, of a voice in choosing those who make and administer the law, a choice in the jury before whom they are tried, and in the judge who decides their punishment.”
—Elizabeth Cady Stanton (1815–1902)
“Today, supremely, it behooves us to remember that a nation shall be saved by the power that sleeps in its own bosom; or by none; shall be renewed in hope, in confidence, in strength by waters welling up from its own sweet, perennial springs. Not from above; not by patronage of its aristocrats. The flower does not bear the root, but the root the flower.”
—Woodrow Wilson (1856–1924)