TABLE 11.1 Calculating Concentration Ratios from Market Shares

The concentration ratio approach can help to clarify some of the fuzziness over deciding when a merger might

affect competition. For instance, if two of the smallest firms in the hypothetical market for repairing

automobile windshields merged, the four-firm concentration ratio would not change—which implies that there

is not much worry that the degree of competition in the market has notably diminished. However, if the top two

firms merged, then the four-firm concentration ratio would become 46 (that is, 26 + 8 + 6 + 6). While this

concentration ratio is modestly higher, the four-firm concentration ratio would still be less than half, so such a

proposed merger might barely raise an eyebrow among antitrust regulators.

LINK IT UP

Visit this website (http://openstax.org/l/Google_FTC) to read an article about Google’s run-in with the FTC.

The Herfindahl-Hirschman Index
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