A concentration ratio measures the combined market share of the largest ‘N’ firms in an industry.
A four firm concentration ratio of 97% is written:
This means the largest 4 firms own a combined market share of 97%.
A concentrated market is one in which a few large firms dominate. A few large produces have a large market share. is high.
A diluted market is one in which there are many small firms. There is a lot of competition and no firms dominate the market. is low.