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When Different Market Concentration Indices Agree

  • Hennessy, David A.
  • Lapan, Harvey E.

Market concentration ratios are popular statistics for characterizing the extent of market dominance in an imperfectly competitive market, but these ratios may not agree when comparing two markets. Neither do they necessarily agree with the Herfindahl-Hirschman or entropy indices. This letter compares two Cournot oligopoly markets in which firms have constant unit costs. It is shown that the majorization pre-ordering on normalized marketing margin vectors is both necessary and sufficient for all aforementioned indices to agree on which is the more concentrated market.

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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12550.

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Date of creation: 23 Mar 2006
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Publication status: Published in Economics Letters, May 2007, vol. 95, pp. 234-240
Handle: RePEc:isu:genres:12550
Contact details of provider: Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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  1. repec:cup:cbooks:9780521622448 is not listed on IDEAS
  2. Howitt, Peter & Griffith, Rachel & Aghion, Philippe & Blundell, Richard & Bloom, Nick, 2005. "Competition and Innovation: An Inverted-U Relationship," Scholarly Articles 4481507, Harvard University Department of Economics.
  3. Harvey E. Lapan & David A. Hennessy, 2002. "Symmetry and order in the portfolio allocation problem," Economic Theory, Springer, vol. 19(4), pages 747-772.
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  5. Greg Shaffer & Stephen W. Salant, 1999. "Unequal Treatment of Identical Agents in Cournot Equilibrium," American Economic Review, American Economic Association, vol. 89(3), pages 585-604, June.
  6. Zhao, Jingang, 2001. "A characterization for the negative welfare effects of cost reduction in Cournot oligopoly," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 455-469, March.
  7. Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
  8. Efe A. Ok, 1997. "A note on the existence of progressive tax structures," Social Choice and Welfare, Springer, vol. 14(4), pages 527-543.
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