Market Control

In today’s market industries in general aim to be the top in there expertise. Being at the top means a lot to customers, corporate investors, and employees as well. In order to find out who is at the top of the market companies use what is called the Four-Firm Concentration Ratio. The four firm concentration ratio is the proportion of total output in an industry that's produced by the four largest firms in the industry. This is one of two common concentration ratios. The other is the eight-firm concentration ratio. The four-firm concentration ratio is commonly used to indicate how market control is held by the four largest firms in the industry.

Now let’s take for example say 20 firms with a concentration ratio of 30%, this means this is more of a free market. Since only 30% is held by the four-firm concentration ratio there is more space for the “little guys” to make money. This also creates more completion for everyone. This is a great economic booster and would have a positive effect on everyone except the top four firms. This is a result of “market over crowding.”

In another example there are 20 firms with a concentration ratio of 80%. This means there is less of a market. The four major firms control 80% of the market. This is not good for the average person, since the price is basically controlled by four companies. Yes