The four firm concentration ratio (C4) is a measure of the total output produced by the four biggest firms in a particular industry. The concentration ratio is an indication of the extent to which an industry's market is controlled by only a small number of firms. Industries with high concentrations are said to be oligopolistic.
Suppose the market shares of the four largest firms in the oil production industry are the following: Firm A - 26%, Firm B - 17%, Firm C - 11%, Firm D - 8%, then the following would be inputted into the calculator above
| Firm A's market share | 26 | |||
| Firm B's market share | 17 | |||
| Firm C's market share | 11 | |||
| Firm D's market share | 8 |
In entering the above market shares of the four largest firms in the oil industry, we get that the four firm concentration ratio is equal to, C4 = 62%. A four firm concentration of 62% is indicative of a medium level of concentration. The amount of competition between firms is inversely related to the four firm concentration ratio.
Concentration Level
High 80% - 100%
Medium 50% - 80%
Low 0% - 50%
References
FOUR-FIRM CONCENTRATION RATIO, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2016.