Chris Lavery
Research Project:
Industry Concentration
Industry concentration has two forms of measurement. The first is based upon a 100% concentration of all the firms in a certain industry. This is known as the concentration ratio and represents the value of the top firms of an industry stated as a percent of the total industry scales. The other type of concentration measurement is known as the Herfindahl index and is calculated by squaring the individual producers percentage of the market and adding them together. For instance, if there were 5 firms in an industry and they each had 20% of the total output, the Herfindahl index would be; (20 squared) + (20 squared) + (20 squared) + (20 squared) + (20 squared)= 2000. An example of these concentration ratios, taken from the 1997 US government economic census, are as follows:
4-Firm Concentration Ratio Herfindahl Index
Meat products: 35 393
Fruit and vegetable canning: 24 &n ...