Economics 1021A/B Chapter Notes - Chapter 10: Product Differentiation, Monopolistic Competition, Perfect Competition
10 Sep 2013
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ECON 1021A/B Full Course Notes
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Oligopoly: a market in which a small number of firms compete: products produced by different firms may be identical or similar. Measures of concentration: four-firm concentration ratio: The percentage of the value of sales accounted for by the four largest firms in an industry. Lower the concentration, higher the degree of competition. Above 60% is regarded as highly concentrated and dominated by a few firms. Below 60% is regarded as a competitive market: herfindahl-hirschman index (hhi): Square of the percentage market share of each firm summed over the largest 50 firms in a market. Lower the hhi, higher the level of competition. Between 1000 and 1800 is regarded as being moderately competitive. Above 1800 is regarded as being uncompetitive. Limitations of a concentration measure: geographical scope of a market: Concentration measures take a national view on the market. However, many goods are sold in only the regional market, or the global market: barriers to entry and firm turnover:
