Concentration of industry (concentration Ratio)

Industry concentration is the most basic and important factor to determine the market structure, which embodies the competition and monopoly degree of the market, and the concentration measurement indexes are often used: industry concentration rate (CRN index), Helfindal-Hirshman index (herfindahl-hirschmanindex, abbreviation: HHI , hereinafter referred to as Hirshman index), Lorenz curve, Gini coefficient, inverse exponent and entropy index, among which two indexes of concentration rate (CRn) and Hirshman index (HHI) are often used in antitrust economic analysis.
There are a lot of specific methods and corresponding indexes for measuring the concentration degree of industry, the absolute concentration degree (>CRN) and the Herfindahl Index (HI) are chosen to measure the market concentration index.

Industry concentration rate (CRN index)
The industry concentration rate refers to the total market share of the top N largest enterprises in the relevant market of the industry. For example, CR4 refers to the four largest companies that occupy the relevant market share. Similarly, five enterprise concentration rate (CR5), eight enterprise concentration rate (CR8) can be calculated. However, the disadvantage of the concentration rate is that it does not indicate the total number of companies that are operating and competing in the industry-related market. For example, CR4 with as much as 75% in two industry shares may not be the same, because one industry may have only a few enterprises while another industry may have many enterprises.
Exponential formula
Exponential formula
The CRN index is represented by the proportion of the market share of the largest n enterprises in the industry as a percentage of the total industry market. Set the total sales of an industry is X, the sales of the first enterprise is: Xi, the market share of the first enterprise is: si=xi/x, also set CRN for the industry's largest n enterprises accounted for the market share of the sum, there are: (see right figure Formula One)
It is generally believed that if the industry concentrates CR4 or cr8<40, the industry is competitive, and if 30≤CR4 or 40≤CR8, the industry is oligopoly.
CRN's calculations can be subdivided into the following two scenarios:
(1) If the market share of the industry is known, its calculation formula: (see right figure Formula Two)
Among them: Si is the first enterprise to occupy the market share, is the total number of enterprises in this industry.
(2) The calculation formula of the output, output, sales, sales, number of employees and total assets of the enterprises is known in the industry: (see the Formula Three on the right):
CRn: The largest number of industry concentration in the first few enterprises;
I: The company's output value, production, sales, sales, number of employees, total assets, etc.
N: The largest number of enterprises in the industry;
N: Total number of enterprises in the industry.
The classification of the market structure by Bain, USA
The classification of the market structure by Bain, USA
Usually n=4 or n=8, at this time, the industry concentration of the industry in the largest number of the top 4 or the first 8 enterprises of the concentration degree.
According to the division standard of industrial concentration between Bain and Japan Miti, the structure of industrial market is divided into two categories: oligopoly (cr8≥40) and competitive (cr8<40%). Among them, the oligopoly is subdivided into very high oligopoly (cr8≥70%) and low concentration (40%≤cr8<70%), and the competition is subdivided into low concentration competition (20%≤cr8<40%) and decentralized competition (cr8<20%).

Concentration of industry (concentration Ratio)