Concentration Analysis: Measuring Market Power

Asset Vantage24 Apr, 2023Business

Concentration Analysis Is A Tool That Helps Businesses Identify Areas Of Concentration And Provides Valuable Insights Into A Company's Financial Health. Concentration analysis is a useful tool in economics and business for measuring the level of market power and competition in each industry. It involves measuring the degree of market concentration by calculating the market share of the largest firms in an industry, as well as calculating various concentration ratios and indices. One Commonly used concentration ratio is the four-firm concentration ratio, which measures the combined market share of the four largest firms in an industry. Another commonly used measure is the Herfindahl-Hirschman Index (HHI), which takes into account the market share of all firms in an industry and assigns a higher weight to larger firms.