Market concentration indicators. Estimating the concentration of the distance selling market Parameters for assessing the level of market concentration

Introduction. 2

Market definition. 5

Definition of an indicator of the size of the enterprise. 9

Producer concentration and economies of scale. eleven

Indicators of concentration and its assessment. fourteen

Conclusion. 22

Literature.. 24

Introduction

One of the main directions in the development of the economy for many years has been the consolidation of its subjects. Enterprises are no longer united only within the framework of an industry or a state. Transnational associations are emerging.

The concentration of production in a general sense is the association of factors of production around one center.

Geographical concentration - the desire of enterprises to settle and develop in those places where other enterprises are already located.

Until relatively recently, the geographical concentration of enterprises was a phenomenon characteristic of the process of industrial development; the desire to achieve the highest profitability and, consequently, cost reduction forced to look for the most suitable place for this:

Located next to the factors of production, namely, sources of raw materials, sources of energy, semi-finished products produced by enterprises already settled there, labor;

Favorable from a marketing point of view: availability consumer market, the possibility of convenient connection to the transport artery.

Today, these factors no longer matter: the progress made in the field of transport (in technical terms- this is an increase in speed and reliability, in economic terms - a decrease in cost) makes enterprises, in terms of their location, less dependent on energy sources and raw materials, and even on sales markets. Moreover, the concentration of population in cities, which naturally occurred along with the concentration of development industrial enterprises, entailed such costs (social sphere) and negative consequences (the decline of entire regions) for the local population and authorities that governments are trying to slow down the process of geographical concentration and even stimulate the decentralization of industry.

Economic concentration - the desire to increase the size of enterprises.

In principle, the process of economic concentration of enterprises is represented in to a large extent independent of the economic and social order, since it is caused by the desire to ensure higher profitability by reducing costs, which naturally leads to an increase in the productive capacity of enterprises in order to achieve higher labor productivity. However, the forms, methods and target orientation of the process can differ significantly depending on the economic and social system under which it takes place.

In countries with a capitalist system, this process is associated with the desire to obtain maximum profit, that is, to achieve profitability only in the sense in which it is understood by the leaders of the enterprise. It is implemented either through the enterprise's own expansion, increasing the size or number of its institutions, or through more or less close integration with other enterprises. Consolidated enterprises can take various forms - trusts, cartels, concerns, holdings, conglomerates, etc. etc. In the area of Agriculture this process is manifested mainly in the increase in the size of farms, occurring spontaneously or as part of government programs(measures to enlarge farms). True, the concentration of agricultural structures is met with resistance from the rural population, seeking to protect small family farms.

The process of concentration, which takes place in different ways in different sectors of the economy and in different countries, is not, however, infinite. First of all, it has a technical limit: within the framework of a given market, a rational combination of production factors implies the existence of a certain optimal size of an enterprise, the excess of which entails a decrease in profitability as a result of the emergence and growth of negative phenomena (waste of resources, inconsistency of actions, complication management structures). In addition, governments may be forced to suspend or limit the process of concentration to the extent that it is naturally accompanied by tendencies towards monopolization. Chase after maximum profit, in fact, forces enterprises to extract all possible benefits from the market and at the same time, at a certain stage of the concentration process, subordinate it to themselves, thereby reducing the impact of competition and even completely eliminating it. That is why there is antitrust law, applied, albeit with greater or lesser degree of determination and effectiveness.

In the capitalist countries the process of concentration took on an international dimension and led to the formation of associations for which there are no borders and which today are usually called transnational corporations; the oil trusts are a particularly striking example.

Viewed from this perspective, the process of concentration of enterprises, we can say that it should develop with greater flexibility and at the same time more consistently, giving preference to the principles of free, natural expansion and technological compatibility of production units.

In any socio-economic system, the process of concentration can take two forms:

Horizontal concentration, in which enterprises operating at the same stage of a given production process are combined;

Vertical concentration, in which enterprises are combined that are involved in business at different stages of the production process or engaged in different but complementary activities.

Market definition

The market is the basic concept of microeconomic analysis. It is in the market that firms interact. The parameters of the market equilibrium and the possibility of its change are of primary interest to the researcher. However, in practice it is not easy to determine the boundaries of the market. The market for product X is a set of sellers and buyers of product X. Speaking of "product X", we can mean both a single product and a group of substitute products.

It is possible to err in the direction of underestimating the number of goods that belong to a given market, arguing, for example, that the market involves the sale of only a homogeneous product. In this case, the market will be defined too narrowly, such as the Tide laundry detergent market. A company producing the appropriate laundry detergent would appear to have a monopoly in such a market. In fact, despite the difference in consumer characteristics of various brands of washing powders and detergents, companies producing these goods will compete vigorously with each other.

It is also possible to err in the direction of an overly broad interpretation of the market: two goods belong to the same market if they are substitutes (substitutes). In this case, the firm's monopoly power in the market is underestimated, because goods always differ either in quality, or in the place of sale, or in availability for a certain category of consumers, or in the availability of information about the product. In the limit, the entire economy can be represented as a single market, where different goods to some extent replace each other. However, this approach is unacceptable for characterizing the forms and methods of competition and the monopoly power of firms in the market - which is the subject of the theory of industrial organization.

The definition of the market is related to the purpose of the study. For example, if coal mining is being considered for an energy policy effectiveness study, then the electricity market should be defined broadly, i.e. consider simultaneously the extraction of coal, gas, oil and the production of atomic energy. If mergers of two coal mining companies are analyzed, then here coal industry should be interpreted in the narrowest sense.

Market identification will obviously depend on the breadth or narrowness of its boundaries. There are several types of market boundaries: commodity (product) boundaries, reflecting the ability of goods to replace each other in consumption; time limits associated with significant change conditions of supply and demand in time; geographic boundaries. The required breadth or narrowness of boundaries in each particular case depends, firstly, on the characteristics of the product, and secondly, on the goals of the analysis. Thus, for a durable good, the time limits of the market will be much broader and less definite than for a commodity of current consumption. For consumer goods one market will include a greater number of product names than for goods for industrial purposes. The definition of the geographical boundaries of the market depends on the actual severity of competition among sellers in the national or world market, firstly, and on the height of the barriers to penetration of "external" sellers into the regional market, secondly.

One of the difficult questions is the question of the relationship between the market and the industry. An industry is a set of enterprises that produce similar products, using similar resources and similar technologies. The differences between the market and the industry are based on the fact that the market is united by the need to be satisfied, and the industry is united by the nature of the technologies used. Identification of the industry and the market, as a rule, is unacceptable - the goods sold by the enterprises of the industry can be more or less close substitutes, but they can also be completely independent goods. In turn, the market and the sub-sector identified within a particular industry on the basis of the production of close substitute goods can sometimes be considered as interchangeable concepts. Such a simplification is all the more acceptable, the more specialized the enterprises of the sub-sector. When we talk further about the industry (market), we will mean exactly the enterprises of the sub-sector, united by the release of replaceable products and at the same time competing with each other in the sale of these products.

J. Robinson proposed the following definition of the market, which is used with slight variations by the antimonopoly committees of many countries. The market includes a homogeneous product and its substitutes until a sharp break is found in the chain of commodity substitutes. The degree of substitution (substitution) is characterized by an indicator of cross-price elasticity of demand. As soon as the cross elasticity becomes less than a certain predetermined value, one can speak of a break in the chain of commodity substitutes, and hence of the market boundary. By setting different values of cross elasticity, we can obtain different market scales.

In the countries of the European Economic Community, other criteria for identifying a market are also used.

1. The indicator of change in revenue when the price changes. For example, suppose the price of good A has risen. Consider how the revenue of manufacturers of this product has changed. If revenue has increased (or, accordingly, the increase in sellers' profits is positive), the market is limited only to product A. If revenue has decreased (the increase in producers' profits is negative or at least non-positive), then, therefore, there is a close substitute, product B. Therefore, it is wrong to talk about the market product A, you need to look for product B and check the market for the product again according to the proposed method. Thus, the dynamics of revenues and profits of manufacturing firms with a sufficiently long rise in prices indicates the boundaries of the market. This criterion is based on the principle of direct price elasticity of demand. With a sufficiently aggregated definition of the market, the demand in such a market should be sufficiently inelastic. In this case, an increase in the price of sellers leads to an increase in their revenue.

2. Correlation of commodity prices over time. The positive correlation of price movements of goods over a long period of time (5-10 years) indicates that goods are sustainable substitutes, i.e. constitute one market. It is easy to see that this criterion, as well as the definition of the market used by J. Robinson, is based on the concept of cross-price elasticity. If goods A and B are close substitutes, an increase in the price of good A leads to an increase in the demand for good B, and other things equal conditions- an increase in the price of goods B.

3. Geographical limitation of the market. As a criterion for belonging of different territories to the same geographic market, the same conditions of competition are singled out, such as the interconnectedness of demand, the absence of customs barriers, similar national (local) preferences, insignificant differences in prices, relatively small transport costs within the region, substitutability in supply.

Having identified the boundaries of the market, we must determine the firms that produce goods in this market. How correctly the circle of enterprises operating in our market is defined can be checked using two indicators: the indicator of specialization and the indicator of coverage.

The indicator of specialization is the ratio of the volume of sales of a given product to the volume of sales of all goods by firms assigned by us to this industry. A similar indicator can be calculated for an individual enterprise.

The coverage indicator is the ratio of the volume of sales of a given product by enterprises assigned by us to this industry to the total sales of this product by all industries.

A study of the concentration of sellers in the market will lead to qualitative results if the specialization indicator and the coverage indicator are large enough.

Determining the Size of an Enterprise

Indicators of the level of concentration are built on the basis of comparing the size of the enterprise (firm) with the size of the market in which it operates. The higher the size of firms compared to the scale of the entire market, the higher the concentration of producers (sellers) in this market.

The problem is to answer the question: what can be considered the size of the enterprise? There are four main indicators that characterize the size of the firm in relation to the size of the market:

The share of the company's sales in the market sales volume;

The share of employees at the enterprise in the total number of people employed in the production of this product;

The share of the value of the firm's assets in the value of the assets of all firms operating in the market in question;

The share of value added at the enterprise in the sum of the value added of all manufacturers operating in the market.

The results of calculating the concentration indicators can significantly depend on the choice of a firm size measure. For example, if large firms use more capital-intensive technologies than smaller firms, then the level of concentration measured in terms of asset values will be greater than the level of concentration for the same industry, but measured in terms of sales or employment. The level of concentration, expressed in terms of value added, will be affected by vertical integration. If large firms are more integrated than medium and small firms, then using value added as an indicator of firm size will yield a higher level of concentration than sales. In addition, there is the problem of diversification: for firms operating in different sub-sectors and different markets, it is difficult to isolate employment, sales, or value added from that market.

Sometimes the size largest firms can serve as a measure of market concentration. It is this criterion that underlies the definition of a dominant position in Russia (a sign of dominance is control of at least 35% of the market), in the UK (respectively, at least 25% of the market). .

Producer concentration and economies of scale

The concentration of producers in industry markets leads to an increase in the size of firms. Following Wiener's study of cost curves, in the analysis of the industrial organization of markets, it is customary to assume that the size of firms and their number in an industry are related to the level of returns to scale of production. This, as a rule, manifests itself in the fact that large market participants manage to produce and sell products at lower average costs than relatively small manufacturers can afford. The cost savings from increasing scale of production is called economies of scale. Quite often, economies of scale are analyzed from three points of view:

release of one type of product;

release of all products of one enterprise;

output of the company, consisting of several production units.

Each of these aspects requires special consideration. We will only note the general points. These include, first of all, the fact that large firms are able to reduce interruptions in the production process. This is expressed both in the reduction of equipment setup time per unit of manufactured product, and in more rational organization production activities, and in the growth of the experience of the company's employees.

In addition, with the increase in the scale of production, unit costs decrease due to the fact that, although overhead costs in efficient firms increase, specific gravity in unit costs is reduced. The wholesale purchase of resources allows large firms, on the one hand, to achieve a reduction in prices for resources, on the other hand, to use them more rationally. In addition, large firms have established stable relationships with both suppliers and distribution organizations and transport companies.

It should also be borne in mind that in large firms, as a rule, more qualified engineers, specialists, and workers are concentrated, since they are able to provide a decent level of remuneration and provide an opportunity to work on advanced technology.

However, the growth of the size of the enterprise is not unlimited. Learning curves tend to flatten as firms grow. The growth of remuneration for work is gradually suspended. The need for labor force leads to the expansion of the geography of its attraction. The rationality of resource processing when using traditional technology gradually reaches a certain stabilization. The speed of delivery of resources to the company decreases and delivery becomes more complicated finished products. Yes, and managing a large unit is more difficult than a small one. Consequently, all types of expenses are growing. This means that economies of scale have their limits. Hence, there is a need for an optimal combination of the firm's growth rate and changes in production costs per unit of output. As foreign researchers note, the shape of the graph of the function of long-term average costs depending on the growth in production becomes as shown in Fig. 2

Fig. 2 A typical graph of the function of long-term average costs depending on the growth in production volume:

LRAC - long run average cost curve

Up to a certain minimally efficient level of output (in Fig. 2 this is the OA segment), the economies of scale are significant, which manifests itself in a decrease in average costs as the volume of production and the scale of output increase. With the help of organizational and technological transformations, it is possible to slightly increase the size of the company beyond the segment OA, however, at point B, the negative consequences of excessive growth in the scale of production occur and an increase in average costs will be observed.

Thus, economies of scale are always historically specific and depend on how quickly the production technology changes, how intensively the company's management system is improved, how accurately top management the company will catch the point at which it is necessary to change the attitude towards the growth of the scale of production.

Not all firms manage to take advantage of economies of scale, but only a few lucky ones. And those firms that succeed, obviously, have a different mechanism for reallocating resources. Consequently, in the structure of the industry market, there is no homogeneity in the nature of firms, at least in relation to the extent to which each of them is able to take advantage of economies of scale.

The scale effect is schematically shown in Figure 3.

Concentration indicators and its assessment

The concentration index is measured as the sum of the market shares of the largest firms operating in the market:

where Yi is the market share of the i-th firm;

k is the number of firms for which this indicator is calculated.

The concentration index measures the sum of the shares of the k largest firms in an industry (with k , n is the number of firms in the industry). Market share is measured in relative shares (0

This feature of the concentration index is associated with a possible inaccuracy in its use.

The insufficiency of the concentration index to characterize the market power potential of firms is explained by the fact that it does not reflect the distribution of shares both within the group of largest firms and outside it - between outsider firms. To solve this problem, the countries of the European Economic Community actively use the Lind index, which characterizes the ratio of the shares of the largest firms in the market. In addition, other indicators of concentration provide additional information about the distribution of the market among firms.

The Herfindahl-Hirschman index is defined as the sum of the squared shares of all firms in the market:

The index takes values from 0 (in the ideal case of perfect competition, when there are infinitely many sellers on the market, each of which controls an insignificant share of the market) to 1 (when there is only one firm producing 100% of the output on the market). If we consider market shares as a percentage, the index will take values from 0 to 10,000. The larger the index value, the higher the concentration of sellers in the market.

Since 1982, the Herfindahl-Hirschman index has been the main benchmark in the implementation of US antitrust policy. Its main advantage is the ability to react sensitively to the redistribution of shares between firms operating in the market. Table 4 shows how the value of the Herfindahl-Hirschman index changes with an increase in the share of the largest firm in the market. If the shares of all firms are the same, then HHI=1/n

An increase in the market share of the largest firm, for example from 40 to 70%, causes an increase in the value of the Herfindahl-Hirschman index much more significant than from 1 to 30% (0.16-0.49 vs. 0.0001-0.09, by 33% points vs. 8.99). This growth adequately reflects the strengthening of monopoly power as the large firm captures an increasing share of the market. The Herfindahl-Hirschman Index provides information about the relative ability of firms to influence the market under different conditions. market structures. The market power of the dominant firm in a competitive environment that controls 50% of the market is comparable to the market power of each of the four oligopolistic sellers. Similarly, on average, each of the duopolists that control the market will have approximately the same ability to influence market price, which is the dominant firm that controls 70% of the market.

Table 1. Dependence of the Herfindahl-Hirschman index on the market share of the dominant firm

The value of the Herfindahl-Hirschman index is directly related to the dispersion measure of firms' market shares, so that:

where n is the number of firms in the market;

s2 is the dispersion indicator of the firm's market shares, equal to ;

where Y is the average market share of the firm, equal to 1/n.

The above formula allows us to distinguish between the influence on the Herfindahl-Hirschman index of the number of firms in the market and the distribution of the market between them. If all firms in the market control the same share, the dispersion index is zero and the value of the Herfindahl-Hirschman index is inversely proportional to the number of firms in the market. With the same number of firms in the market, the more their shares differ, the higher the value of the index.

The Herfindahl-Hirschman index, due to its sensitivity to changes in the firm's market share, acquires the ability to indirectly indicate the amount of economic profit received as a result of the exercise of monopoly power.

Below we will show the relationship of the index value with the Lerner indicator of monopoly power.

The entropy index shows the average value of the logarithm of the reciprocal of market share, weighted by the market shares of firms:

The entropy coefficient is the reciprocal of concentration: the higher its value, the lower the concentration of sellers in the market.

To measure the degree of inequality in the size of firms operating in the market, the spread indicator of the logarithms of the market shares of firms is used, the dispersion index:

where Yi is the firm's market share;

Y - the average share of the firm in the market, equal to 1/n;

n is the number of firms in the market.

The greater the spread, the higher the concentration of sellers in the market. However, the spread of logarithms does not provide a measure of the relative size of firms; for a market with two firms of the same size and for a market with 100 firms of the same size, the spread of the logarithms in both cases will be the same and equal to zero, but the level of concentration will obviously be different. Therefore, log scatter can only be used as an aid to estimating inequality in firm size rather than estimating the level of concentration.

The Gini index is a statistical indicator of the form

where Yi is the volume of production of the i-th firm;

Yj is the volume of production of the j-th firm;

n- total number firms.

The Gini index can be conveniently illustrated using the Lorenz curve. The Lorenz curve, which reflects the uneven distribution of any attribute, for the case of concentration of sellers in the market, shows the relationship between the percentage of firms in the market and the market share, calculated on an accrual basis, from the smallest to the largest firms.

The Gini index can be expressed as follows:

The calculation of the Gini index shows that in this case it is approximately 0.18. The higher the Gini index, the higher the uneven distribution of market shares among sellers, and, therefore, ceteris paribus, the higher the concentration indicator.

When using the Gini index to characterize the concentration of sellers in the market, two important points should be taken into account. The first is related to the conceptual flaw of the index. It characterizes, as well as the indicator of the spread of logarithms of shares, the level of uneven distribution of market shares. Therefore, for a hypothetical competitive market where 10,000 firms share the market into 10,000 equal shares, and for a duopoly market where two firms share the market in half, the Gini will be the same. The second point is related to the complexity of calculating the Gini index: to determine it, it is necessary to know the shares of all firms in the industry, including the smallest ones.

In economic theory and practice, there is no single indicator of the level of concentration in an industry. In different studies and for different purposes, different indicators of the concentration of sellers in the market can be used. To assess the merits of the concentration index, the rules proposed by Hanna and Kay are applied.

An ideal measure of seller concentration should meet the following requirements.

Let the concentration indicator be calculated not for n firms in the market, but for k firms with k< n, причем фирмы ранжированы по убыванию рыночной доли. Если концентрация продавцов на рынке A выше, чем на рынке В, значение идеального показателя для рынка А должно быть больше при любом k.

If the share of a large firm increases at the expense of a small firm, then the concentration indicator increases.

The entry of a new firm into the market lowers the level of concentration (provided that the size of the firm is below some significant level).

Mergers and acquisitions increase the degree of concentration.

The Herfindahl-Hirschman and entropy indices meet all the above conditions. Other indexes are partly consistent with these conditions.

Table 2 discusses scientific approaches to managing the concentration of production.

Table 2 - The main elements of scientific approaches to the management of the concentration of production

sign	Technological	Typological	Systemic
sign	Technological	Typological	System-Complex	System-Synergetic
Basis of classification	Production technology	Type of enterprises	Directions for increasing the volume of output	System elements
Object of study	Part of the enterprise, its operating subsystem	Enterprise as a whole
Relationship	They note the organizational connection of concentration with other forms of organization of production
The nature of the manifestation of forms	Specific forms of production concentration	Unified nature of concentration forms	Universal character, assuming a multivariate state	Universal character, taking into account the specificity of the functioning of organizations
Specificity of development	There are industry, market and product specifics	Missing	Manifested in the multivariate combination of forms	Polymorphic nature of the combination of forms, taking into account the specifics of relationships
Direction of development	From simple forms (aggregate) to more complex (factory)	The process is reflected in one of the final forms, which does not imply further development.	Assumes many states, with the possibility of transition into each other.	Assumes many states directed in a single direction of development
Dominant form of production concentration effect	Scale effect of production		Scale effect of production, integration effect	synergy effect, economies of scale
Effect of scale of production	It is achieved by eliminating "bottlenecks" in the technological chain.	Achieved through the integrated use of resources	Achieved through efficient organization of the production process	Based on the complementary effect of the resources involved.

Conclusion

Market concentration (concentration of sellers or buyers) is understood as the density of market structures and the totality of different shares of market agents in terms of supply and demand. A small number of firms in the market, and hence their low density, indicates a high level of concentration of sellers. In the limiting case, the density is equal to unity, i.e. corresponds to a monopoly market. For a given number of firms in the market, the more they differ from each other in terms of the volume of sales of goods, the higher the level of concentration of sellers in the market.

Similar dependencies are also typical for the assessment of the concentration of buyers in the market. The fewer buyers in the market, the higher the level of their concentration. In the limiting case, the density of buyers is equal to one, i.e. corresponds to a monopsony market. For a given number of buyers, the more they differ in terms of demand, the higher the concentration of buyers in the market.

Methods for analyzing the evolution of structure (in terms of concentration) for the market and production are different. In the first case, the focus is on competition and the potential for market capture. The second measures either the distribution of subjects of production by size or geographically.

It can be assumed that under these conditions, the obvious directions of market evolution will be both the rapid growth in the number of new small companies, which include a single enterprise, and the further downsizing of very large old production structures. Under equal conditions, this will lead to a further decrease in concentration, which is partly observed today.

Summarizing the above in this control work, it is easy to conclude that the concentration of production is influenced by a combination of many factors. Their number and ratio, in relation to the conditions of a particular time and place, may be different. Factors of concentration of production are among the dynamic ones. The change in their composition and nature occurs due to changes in factors. Their number and ratio depend on the characteristics of the economic system of society and the nature of the social system as a whole, the progressive development of scientific and technological progress, the economic and geographical conditions of a particular territory, and many others.

An increasing share in the economy of most countries is beginning to acquire the sphere of non-material production, or, as it is sometimes called, the service sector. It should rightfully enter into social production, since it is important for society to produce not only the means of life, but also to carry out the production of life itself in all its forms. That is why such spheres as health care, education, information services, and others are becoming more and more significant in the composition of social production. Objects representing the named and other spheres of social production are also subject to concentration in the geographical space with all the laws inherent in this process.

Literature

1. L.V. Roy, V.P. Tretiak "Analysis of industrial markets", Textbook, M.: Infra-M, 2008. - 442 p.

2. Yu.V. Taranukha "Economics of branch markets", Uch. allowance, M .: Business and service, 2002. - 240s

3. Journal "Problems of theory and practice of management", 5/2004.

4. Magazine "Banking", 8/2007

Threshold market share.

This is the simplest quantitative criterion, the excess of which makes it possible to classify an enterprise as a monopoly or a dominant player in the market. If, for example, in Russia there is a threshold of 35%, then those enterprises that exceed this share are included in the State Register of Monopoly Enterprises.

Index (coefficient) of concentration (CR).

Various methods are used to assess the strength of competition in an industry. Concentration measures are based on comparing the size of a firm with the size of the market in which it operates. The higher the share of the firm compared to the scale (volume) of the entire market, the higher the concentration of producers in this industry or in the target market. The concentration index CR shows the percentage of sales that falls on the share of n largest firms. Firms are ranked according to the market share they control. The most common indicators are: CT-4, CRS, CR20 and CT-50.

From 1968 to 1984, the US Department of Justice used a quadruple measure of the strength of competition in an industry:

where ^ - the volume of sales of products of this assortment group by the /-th company, / = 1.2, 3, 4;

Vp- the volume of the market of this assortment group of products.

With a value CR4 more than 0.75, restrictions were imposed on the merger of enterprises. This indicator was also calculated for 8, 20 and 50 firms, and in Germany, England and Canada - for 3, 6 and 10 firms.

The concentration index can also be defined as the sum of the market shares of the largest firms operating in the market:

where Yj- market share of the i-th firm;

to is the number of firms for which this indicator is calculated.

The previous indicator - the threshold market share - has one drawback: it is applied to an individual enterprise and, in fact, does not characterize the structure of the market for this product as a whole. To a certain extent, this shortcoming is deprived of the concentration coefficient, which characterizes the share of several (for example, 3, 4, 5, 8, 12) largest firms in the total market volume, in percent. It is believed that if the concentration index CR k approaches 100, then the market is characterized by a high degree of monopolization; if it is slightly above zero, then it can be considered as competitive.

The concentration index measures the sum of shares to largest firms in the industry (with to where P - number of firms in the industry). Market share is measured in relative shares (0 Y 1). At k = n obviously Y= 1. For the same number of largest firms, the greater the degree of concentration, the less competitive the industry is. The concentration index does not provide information about the size of firms that are not included in the sample. to, and about the relative size of firms in the sample. It characterizes only the sum of shares of firms, but the gap between firms can be different.

Finally, the concentration index does not take into account the market share that is covered by imports. This is the main reason why the concentration index is practically inapplicable to assessing regional and local market structures. Nevertheless, it remains a perfectly acceptable indicator that can distinguish oligopoly from perfect and monopolistic competition in a given industry.

Herfindahl-Hirschman index. The shortcomings inherent in the concentration index discussed above, criticism of its use in antimonopoly policy led to the fact that in June 1982 the US Department of Justice officially abandoned this indicator and adopted the Herfindahl-Hirschman index as the main characteristic of the market structure. Since 1984, this index has been used in the USA ( HHI), which is calculated by the formula

where SF- the squared market share controlled by the i-th firm.

This index (HHI), as we see, is defined as the sum of the squares of the shares of the sale of goods in the commodity market, expressed as a percentage, attributable to each market entity.

If, for example, the index ( NS) more than 0.18, then we can talk about low intensity (strength) of competition and high concentration of the market, which requires government intervention to normalize the situation in this market. Safe from the point of view of monopolization of the market (NS less than 1000) implies the presence of 10 or more competing firms. Moreover, the share of the largest of them cannot exceed 31%, the two largest - 44, three - 54 and four - 63%.

The maximum value of this index is 1 or 10,000 (depending on the units in which the share is measured) and occurs when there is only one firm (pure monopoly) in the market. As the number of firms increases, the Herfindahl-Hirschman index decreases. The higher the index value, the higher the concentration of sellers in the market. In essence, it characterizes not the share of the market, which is controlled by a few largest companies, but the distribution of "market power" among all the subjects of this market. The maximum value that the index can take corresponds to a situation where the market is completely monopolized by one firm. In this case, obviously ##/= 100 2 = 10,000.

If the number of firms in a given market is greater than one, then the index can take on different values depending on the distribution of market shares. Suppose, for example, that there are 100 firms in a given market. Let's consider two extreme cases. If one giant accounts for 90.1% of sales, and each of the other 99 firms accounts for only 0.1% of the total, then HHJ\u003d 90.1 2 + 99 OD 2 \u003d 8119.1.

If the market shares of all 100 firms are equal and each represents 1% of the total market, then ##/= 100 I 2 = 100.

Since 1982, the Herfindahl-Hirschman index has become the main benchmark of antitrust policy in the United States in relation to assessing the admissibility of various kinds of mergers. It is used to classify merges into three large groups based on the value of the index.

NSh 1000. The market is assessed as not concentrated, and the merger is generally allowed without hindrance.

1000 1400 - Additional merger review by the Department of Justice is required. In any case, this level of the index is alarming and is regarded as a kind of warning signal.

NS> 1800. The market is considered highly concentrated. Mergers in this range (1800-10,000) are subject to three rules:

if as a result of the merger HHI increases by no more than 50 points, the merge is usually allowed;
if it increases by more than 100 points, the merge is prohibited;
growth HHI at 51-99 points becomes, as a rule, the basis for additional verification of the feasibility of the merger.

To accurately calculate the Herfindahl-Hirschman index, you need to know the market shares of all manufacturers of a given product. If the number of manufacturers in the market is very large, it becomes almost impossible to calculate the index.

The Herfindahl-Hirschman Index provides information about the comparative ability of firms to influence the market under different market structures. The market power of a dominant firm in a competitive environment that controls 50% of the market is comparable to the market power of each of the four oligopolistic sellers. Similarly, on average, each of the duopolistic firms that control the market will have approximately the same power to influence the market price as the dominant firm that controls 70% of the market.

Concentration measures are based on comparing the size of a firm with the size of the market in which it operates. The higher the size of firms relative to the scale of the entire market, the higher the concentration of producers.

The concentration index is the sum of the market shares of the largest firms operating in the market :

where Yi is the market share of the i-th firm; k is the number of firms for which this indicator is calculated.

q i - sales volume of the company, Q - market sales volume

The concentration index measures the sum of the shares of the k largest firms in an industry (with k< n, n - число фирм в отрасли). Рыночная доля измеряется в относительных долях (0 < Y < 1). При k = n очевидно Yi = 1. Для одного и того же числа крупнейших фирм чем больше степень концентрации, тем менее конкурентной является отрасль. Индекс концентрации не говорит о том, каков размер фирм, которые не попали в выборку k, а также об относительной величине фирм из выборки. Он характеризует только сумму долей фирм, но разрыв между фирмами может быть разным.

To measure the degree of inequality in the size of firms operating in the market, the indicator of dispersion of market shares is used:

i =1,2,…, n,

where Y i is the firm's market share

The average market share of a firm is ;

n is the number of firms in the market

Also used are indicators of the dispersion of the logarithms of market shares

i =1,2,…, n,

Both of these indicators have the same economic meaning - to determine the uneven distribution of shares between market participants. The greater the uneven distribution of shares, the more concentrated the market, other things being equal.

However, dispersion does not characterize the relative size of firms: for a market with two firms of the same size and for a market with 100 firms of the same size, the dispersion in both cases will be the same and equal to zero, but the level of concentration will be different. Therefore, the dispersion indicator is used as an auxiliary tool.

The Herfindal-Hirshman index is defined as the sum of the squared shares of all firms. active on the market :

The Herfindahl-Hirschman Index provides information on the comparative ability of firms to influence the market under different market structures. The market power of a dominant firm in a competitive environment that controls 50% of the market is comparable to the market power of each of the four oligopolistic sellers. Similarly, on average, each of the duopolists that control the market will have approximately the same power to influence the market price as the dominant firm that controls 70% of the market.

The value of the Herfindahl-Hirschman index is directly related to the distribution of market shares of firms, so that:

where n is the number of firms in the market;

is a measure of the dispersion of the firm's market share.

The above formula allows us to distinguish between the influence on the Herfindahl-Hirschman index of the number of firms in the market and the distribution of the market between them. If all firms in the market control the same share, the distribution index is zero and the value of the Herfindahl-Hirschman index is inversely proportional to the number of firms in the market. With the same number of firms in the market, the more their shares differ, the higher the value of the index.

Gini index

It is a statistic based on the Lorenz curve.

The Lorenz curve, which reflects the uneven distribution of any attribute, for the case of concentration of sellers in the market, shows the relationship between the percentage of firms in the market and the market share, calculated on an accrual basis, from the smallest to the largest firms.

In the example of industry market A used by us above, the Lorenz curve will have the form, as shown in Fig.

The Gini index is the ratio of the area bounded by the actual Lorentz curve and the Lorentz curve for an absolutely uniform distribution of market shares (the so-called "absolute equality curve") to the area of the triangle bounded by the Lorenz curve for an absolutely uniform distribution of shares and the abscissa and ordinate axes.

The Gini index represents a statistic of the form:

Y i - production volume of the i-th firm

Y j - production volume of the j-th firm

n is the total number of firms

The higher the Gini index, the higher the uneven distribution of market shares between sellers, and therefore, other things being equal, the higher the concentration in the market,

There are two important points to keep in mind when using the Gini index to characterize the concentration of sellers. The first is related to the conceptual flaw of the index. It characterizes, like the indicator of dispersion of logarithms of shares, the level of uneven distribution of market shares. Therefore, for a hypothetical competitive market, where 10,000 firms divide the market into 10,000 equal shares, and for a duopoly market, where two firms divide the market in half, the Gini index will be the same. The second point is related to the complexity of calculating the Gini index: to determine it, it is necessary to know the shares of all firms in the industry, including the smallest ones.

CR concentration index- This is an indicator that characterizes what market share falls on a given number of the largest players.

Since the concept of "a given amount" looks rather vague, a number is added after the letters CR, which shows how many of the largest players the market is coming speech.

So the following are (mostly) used CR concentration indices: CR2, CR3, CR4, CR5, CR8, CR10.

In principle, the number of "largest players" can be anything. In everyday life, you often come across, for example, the "list of 100 richest people", "500 most large companies", etc. It all depends on the goals that the researcher sets for himself.

CR concentration index formula

Market concentration index CR (concentration ratio) is defined as the sum of the market shares of the n largest companies. The higher the value obtained, the closer it is to 100, the more monopolized the market.

Features of using the concentration index (CR) for practical purposes

Since the concentration index is an arithmetic sum, it actually ignores the distribution structure of market shares between companies included in the index calculation.

Imagine that we have determined that in this market CR5 = 80, that is, the five largest companies occupy 80% of the market. Everything seems to be clear, but...

This may be the situation "16+16+16+16+16", or maybe "60+15+3+1+1". Agree, in this situation we are talking about a fundamentally different distribution of "power of influence" on market processes! A good example to illustrate the shortcomings of the concentration index is practical example of calculating the concentration index CR .

Thus, the concentration index must be used as a kind of addition to other economic indicators or the number (n) of companies should be selected in such a way as to objectively correspond to the structure of the distribution of forces in the market.

Due to the disadvantages listed above, the concentration index not used as the main indicator. In the United States, the Herfindahl-Hirschman index is used instead, and in the European Union, the Linda index (coefficient).

For the purposes of the overall evaluation situations concentration index (CR) very acceptable. Any business plan contains a description of the "major competitors" and the market share that they account for. In the periodical press, the phrase "X% of the country's inhabitants account for Y% of income" also makes it possible to present the situation quite clearly.

Market concentration

Market concentration- the relative size and number of enterprises operating in the market. This phenomenon is often referred to simply concentration.

Market concentration is related to the concept of concentration of production, referring to the concentration of production of related products on several large enterprises region.

Indicators of this value: the Herfindahl-Hirschman index (HHI, XXI) and the concentration index (eng. concentration ratio, CR).

Usage

When antitrust authorities evaluate the infringement of competition by one or more enterprises, they usually identify the market and try to measure its concentration, that is, the degree of competition in this market.

There are game theory models indicating that even when there is no cartel, an increase in market concentration leads to higher prices and lower consumer welfare. An example of this is the Cournot and Bertrand oligopolies.