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When Different Market Concentration Indices Agree

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

Abstract

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.

Suggested Citation

  • Hennessy, David A. & Lapan, Harvey E., 2006. "When Different Market Concentration Indices Agree," Staff General Research Papers Archive 12550, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:12550
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    6. Mohammed, Nafisah & ismail, abdul & Muhammad, Junaina, 2016. "Concentration and Competition in Dual Banking Industry: A Structural Approach," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 50(2), pages 49-70.
    7. Hrazdil, Karel & Zhang, Ray, 2012. "The importance of industry classification in estimating concentration ratios," Economics Letters, Elsevier, vol. 114(2), pages 224-227.
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