Function of number of companies & their respective shares of total production in a market
Competition law
Basic concepts
History of competition law
Monopoly and oligopoly
Coercive monopoly
Natural monopoly
Barriers to entry
Herfindahl–Hirschman index
Market concentration
Market power
SSNIP test
Relevant market
Merger control
Anti-competitive practices
Monopolization
Collusion
Formation of cartels
Price fixing (cases)
Bid rigging
Tacit collusion
Product bundling and tying
Refusal to deal
Group boycott
Essential facilities
Exclusive dealing
Dividing territories
Predatory pricing
Misuse of patents and copyrights
Enforcement authorities and organizations
International Competition Network
List of competition regulators
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In economics, market concentration is a function of the number of firms and their respective shares of the total production (alternatively, total capacity or total reserves) in a market.[1] Market concentration is the portion of a given market's market share that is held by a small number of businesses. To ascertain whether an industry[2] is competitive or not, it is employed in antitrust law[3] and economic regulation. When market concentration is high, it indicates that a few firms dominate the market and oligopoly[4] or monopolistic competition is likely to exist. In most cases, high market concentration produces undesirable consequences such as reduced competition and higher prices.[5]
The market concentration ratio measures the concentration of the top firms in the market, this can be through various metrics such as sales, employment numbers, active users or other relevant indicators.[1] In theory and in practice, market concentration is closely associated with market competitiveness, and therefore is important to various antitrust agencies when considering proposed mergers and other regulatory issues.[6] Market concentration is important in determining firm market power in setting prices and quantities.
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.[7]
Market concentration is related to industrial concentration, which concerns the distribution of production within an industry, as opposed to a market. In industrial organization, market concentration may be used as a measure of competition, theorized to be positively related to the rate of profit in the industry, for example in the work of Joe S. Bain.[8]
An alternative economic interpretation is that market concentration is a criterion that can be used to rank order various distributions of firms' shares of the total production (alternatively, total capacity or total reserves) in a market.
^ ab"What is Market Concentration? Definition of Market Concentration, Market Concentration Meaning". The Economic Times. Retrieved 2021-04-24.
^Turner, Scott F.; Mitchell, Will; Bettis, Richard A. (2010). "Responding to Rivals and Complements: How Market Concentration Shapes Generational Product Innovation Strategy". Organization Science. 21 (4): 856. doi:10.1287/orsc.1090.0486. hdl:10161/4440.
^"What We Can Learn from Merger Deals That Never Happened". Harvard Business Review. 2016-06-21. ISSN 0017-8012. Retrieved 2021-04-24.
^Bain, Joe, S (1951). "Relation of Profit Rate to Industry Concentration: American Manufacturing, 1936-1940". The Quarterly Journal of Economics. 65 (3): 293–324. doi:10.2307/1882217. JSTOR 1882217 – via JSTOR.{{cite journal}}: CS1 maint: multiple names: authors list (link)
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