ECN 212 Four Firm Concentration Ratio
25 points

The four firm concentration ratio is the percentage of the value of total sales accounted for by the four largest firms in an industry. In more general terms, it is the market share of the four largest firms in an industry. From a market structure standpoint, if the four firm concentration ratio is greater than 60% the market is an oligopoly. If it is less than 40% it is monopolistic competition.

Often times we use things other than revenue to determine market share. In refining, we use distillation capacity. In automobiles, we use unit sales. For mobile phone comapnies it is often number of subscribers. Each of these is close enough to revenue to give is good picture of the concentration of an industry.

1. What is the four-firm concentration ratio for the refining industry in the US? (10 points)

(For data, go to http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/refinery_capacity_data/historical/2009/table5.pdf )

(Add up the refining capacity of the 4 largest firms and divide by the total found at the end of the report.)

2. What is the four-firm concentration ratio for any other industry in the US? Include your data source (which may not be the text book for this class.) You may use data from any of the last 5 years. (15 points)

Note: When you search for data, don't use "four firm concentration ratio." What you'll get is some econ professor's lecture notes or homework assignment. In both cases the data will be suspect. Search for market share in a prticular industry. Often the data will be found buried in a news story on a particular industry or company. There are also a number of government sources for this type of data.

 

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