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Market concentration is affected through various forces, including barriers to entry and existing competition. Market concentration ratios also allows users to more accurately determine the type of market structure they are observing, from a perfect competitive, to a monopolistic, monopoly or oligopolistic market structure.
A concentration ratio (CR) is the sum of the percentage market shares of (a pre-specified number of) the largest firms in an industry. An n-firm concentration ratio is a common measure of market structure and shows the combined market share of the n largest firms in the market.
If the resulting figure is above a certain threshold then economists will consider the market to have a high concentration (e.g. market X's concentration is 0.142 or 14.2%). This threshold is considered to be 0.25 in the U.S., [ 9 ] while the EU prefers to focus on the level of change, for instance that concern is raised if there is a 0.025 ...
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Market concentration, also referred to as industry concentration, refers to the extent of which market shares of the largest firms in the market account for a significant portion of the economic activities quantifiable by various metrics such as sales, employment, active users. [36]
It's no secret that a handful of tech stocks are powering the S&P 500 to record highs. But while that concentration isn't unusual, the lack of even correlation in the broader market is.
The market structure determines the price formation method of the market. Suppliers and Demanders (sellers and buyers) will aim to find a price that both parties can accept creating a equilibrium quantity. Market definition is an important issue for regulators facing changes in market structure, which needs to be determined. [1]
While the scale of these mega-cap companies may raise eyebrows, their businesses are far more diversified than most, which means concerns about market concentration are arguably overblown.