1. What Is The Four-Firm Concentration Ratio?

The four-firm concentration ratio (CR4) is a metric used to measure market concentration by calculating the combined market share of the four largest firms in an industry. It helps assess the level of competition and market structure.

2. How Does The Calculator Work?

The calculator uses the CR4 formula:

Where:

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

Explanation: The ratio is expressed as a percentage and indicates how much of the total market is controlled by the top four firms.

3. Importance Of CR4 Calculation

Details: CR4 is important for economic analysis, antitrust regulation, and business strategy. A higher CR4 indicates a more concentrated market with less competition, while a lower CR4 suggests a more competitive market.

4. Using The Calculator

Tips: Enter sales figures for the four largest firms and the total market sales in any 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 where a few firms dominate, potentially leading to reduced competition.

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 each firm's market share, giving more weight to larger firms.

Q3: What are the limitations of CR4?
A: CR4 doesn't account for market dynamics, potential new entrants, or regional variations in market concentration.

Q4: When is CR4 most useful?
A: CR4 is most useful for quick assessments of market concentration and for comparing concentration levels across different industries.

Q5: What is considered a competitive market according to CR4?
A: Markets with CR4 below 40% are generally considered competitive, while those above 60% are highly concentrated.