4 Firm Concentration Ratio Calculator Australia

CR4 Formula:

\[ CR4 = \frac{(sales1 + sales2 + sales3 + sales4)}{total\_sales} \times 100 \]

Sales Firm 1:

currency

Sales Firm 2:

currency

Sales Firm 3:

currency

Sales Firm 4:

currency

Total Market Sales:

currency

CR4 (%):

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1. What is the Four-Firm Concentration Ratio?

The Four-Firm Concentration Ratio (CR4) is a measure of market concentration that calculates the combined market share of the four largest firms in an industry. It provides insight into the level of competition and market structure in the Australian market.

2. How Does the Calculator Work?

The calculator uses the CR4 formula:

\[ CR4 = \frac{(sales1 + sales2 + sales3 + sales4)}{total\_sales} \times 100 \]

Where:

\( sales1 \) — Sales of the largest firm (currency)
\( sales2 \) — Sales of the second largest firm (currency)
\( sales3 \) — Sales of the third largest firm (currency)
\( sales4 \) — Sales of the fourth largest firm (currency)
\( total\_sales \) — Total market sales (currency)

Explanation: The equation calculates the percentage of total market sales accounted for by the four largest firms in the industry.

3. Importance of CR4 Calculation

Details: CR4 is crucial for market analysis, competition assessment, and regulatory decisions. A higher CR4 indicates a more concentrated market with less competition, while a lower CR4 suggests a more competitive market environment in Australia.

4. Using the Calculator

Tips: Enter sales figures for the four largest firms and total market sales in the same currency. All values must be positive numbers, and total sales must be greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What does a high CR4 indicate?
A: A high CR4 (typically above 40%) indicates an oligopolistic market structure where a few large firms dominate the Australian market.

Q2: How is CR4 different from HHI?
A: While CR4 measures the combined share of the top four firms, the Herfindahl-Hirschman Index (HHI) squares individual market shares of all firms, giving more weight to larger firms.

Q3: What are the limitations of CR4?
A: CR4 doesn't account for market share distribution among the top four firms or competition from smaller firms. It may underestimate concentration in markets with many small competitors.

Q4: How often should CR4 be calculated?
A: CR4 should be calculated annually or when significant market changes occur to monitor competition trends in the Australian market.

Q5: What industries typically have high CR4 in Australia?
A: Industries like banking, telecommunications, supermarkets, and mining often show higher concentration ratios in the Australian market.