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)
“Have you not heard of that madman who lit a lantern in the bright morning hours, ran to the market place, and cried incessantly: “I seek God! I seek God!””
—Friedrich Nietzsche (1844–1900)
“I talk democracy to these men and women. I tell them that they have the vote, and that theirs is the kingdom and the power and the glory. I say to them “You are supreme: exercise your power.” They say, “That’s right: tell us what to do;” and I tell them. I say “Exercise your vote intelligently by voting for me.” And they do. That’s democracy; and a splendid thing it is too for putting the right men in the right place.”
—George Bernard Shaw (1856–1950)