Statistics

Concentration

Lecturer: Denes Kiss, original material by

Banász Zsuzsanna, Boglárka Konka
E-mail: kiss.denes@gtk.uni-pannon.hu
Concentration 1 of 2

• In economics: concentration ratio is a ratio that indicates the size of

firms in relation to their industry as a whole
0%<Concentration ratios<100%
• No concentration:
0%=perfect competition
Example: CR8=0%=the eight largest firms in the industry would not have
any significant market share

2
Concentration 2 of 2

• Total concentration
100% =extremely concentrated oligopoly
Example CR1= 100%=monopoly
• Low concentration
0% to 50%=perfect competition to oligopoly
• Medium concentration
50% to 80%=an industries in this range is likely an oligopoly
• High concentration
80% to 100%=this category ranges from oligopoly to monopoly 3
Herfindahl index 1 of 3

Also known as Herfindahl–Hirschman Index, HHI or HI Albert O.

Hirschman (1945), later Orris C. It is a commonly accepted measure of
market concentration.
• The major benefit of the Herfindahl index in relation to such measures as
the concentration ratio is that it gives more weight to larger firms.
• Widely applied in
• competition law
• antitrust
• technology management

4
Herfindahl index 2 of 3

• It is calculated by squaring the market share of each firm competing in

the market and then summing the resulting numbers.

• HI = (in some text books you can find s instead of z)

5
Herfindahl index 3 of 3

• HHI<0.01 (or 100): highly competitive index

• HHI index<0.15 (or 1,500): unconcentrated index
• 0.15<HHI index<0.25 (or 1,500 to 2,500): moderate concentration
• HHI index>0.25 (above 2,500): high concentration

• Ranges of HI:

6
Example 16: Continuation of example 15, 1
of 17
• Let’s fill out the missing elements of this table for the concentration
calculations!
Farmland X, average Owners(f) Cumulative g = f/n
(hectare) hectare owners (f’) (%)
0 – 999.99 500 24 24
1000 – 1999.99 1500 42 66
2000 – 2999.99 2500 15 81
3000 – 3999.99 3500 13 94
4000 – 4999.99 4500 5 99
5000 – 5999.99 5500 2 101
6000 – 6999.99 6500 2 103
Σ - - 103 (n) -
7
Example 16: Continuation of example 15, 2
of 17
• Let’s fill out the missing elements of this table for the concentration
calculations!
Farmland X, average Owners(f) Cumulative g = f/n
(hectare) hectare owners (f’) (%)
0 – 999.99 500 24 24 23.3
1000 – 1999.99 1500 42 66 40.8
2000 – 2999.99 2500 15 81 14.6
3000 – 3999.99 3500 13 94 12.6
4000 – 4999.99 4500 5 99 4.9
5000 – 5999.99 5500 2 101 1.9
6000 – 6999.99 6500 2 103 1.9
Σ - - 103 (n) - 100
8
Example 16: Continuation of example 15, 3
of 17
• Let’s fill out the missing elements of this table for the concentration
calculations!
Farmland X, average Owners(f) Cumulative g = f/n g’
(hectare) hectare owners (f’) (%)
0 – 999.99 500 24 24 23.3 23.3
1000 – 1999.99 1500 42 66 40.8 64.1
2000 – 2999.99 2500 15 81 14.6 78.7
3000 – 3999.99 3500 13 94 12.6 91.3
4000 – 4999.99 4500 5 99 4.9 96.2
5000 – 5999.99 5500 2 101 1.9 98.1
6000 – 6999.99 6500 2 103 1.9 100
Σ - - 103 (n) - 100 -
9
Example 16: Continuation of example 15, 4
of 17
• Let’s fill out the missing elements of this table for the concentration
calculations!
Farmland X, average Owners(f) Cumulative g = f/n g’ S=f*x
(hectare) hectare owners (f’) (%)
0 – 999.99 500 24 24 23.3 23.3
1000 – 1999.99 1500 42 66 40.8 64.1
2000 – 2999.99 2500 15 81 14.6 78.7
3000 – 3999.99 3500 13 94 12.6 91.3
4000 – 4999.99 4500 5 99 4.9 96.2
5000 – 5999.99 5500 2 101 1.9 98.1
6000 – 6999.99 6500 2 103 1.9 100
Σ - - 103 (n) - 100 -
10
Example 16: Continuation of example 15, 5
of 17
• Let’s fill out the missing elements of this table for the concentration
calculations!
Farmland X, average Owners(f) Cumulative g = f/n g’ S=f*x
(hectare) hectare owners (f’) (%)
0 – 999.99 500 24 24 23.3 23.3 12000
1000 – 1999.99 1500 42 66 40.8 64.1 63000
2000 – 2999.99 2500 15 81 14.6 78.7 37500
3000 – 3999.99 3500 13 94 12.6 91.3 45500
4000 – 4999.99 4500 5 99 4.9 96.2 22500
5000 – 5999.99 5500 2 101 1.9 98.1 11000
6000 – 6999.99 6500 2 103 1.9 100 14000
Σ - - 103 (n) - 100 - 205500
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Example 16: Continuation of example 15, 6
of 17
• Let’s fill out the missing elements of this table for the concentration
calculations!
Farmland X, average Owners(f) Cumulative g = f/n g’ S=f*x Z=s/s
(hectare) hectare owners (f’) (%) (%)
0 – 999.99 500 24 24 23.3 23.3 12000
1000 – 1999.99 1500 42 66 40.8 64.1 63000
2000 – 2999.99 2500 15 81 14.6 78.7 37500
3000 – 3999.99 3500 13 94 12.6 91.3 45500
4000 – 4999.99 4500 5 99 4.9 96.2 22500
5000 – 5999.99 5500 2 101 1.9 98.1 11000
6000 – 6999.99 6500 2 103 1.9 100 13000
Σ - - 103 (n) - 100 - 204500 -
12
Example 16: Continuation of example 15, 7
of 17
• Let’s fill out the missing elements of this table for the concentration
calculations!
Farmland X, average Owners(f) Cumulative g = f/n g’ S=f*x Z=s/s Z’
(hectare) hectare owners (f’) (%) (%)
0 – 999.99 500 24 24 23.3 23.3 12000 5.8 5.8
1000 – 1999.99 1500 42 66 40.8 64.1 63000 30.8 36.6
2000 – 2999.99 2500 15 81 14.6 78.7 37500 18.3 54.9
3000 – 3999.99 3500 13 94 12.6 91.3 45500 22.2 77.1
4000 – 4999.99 4500 5 99 4.9 96.2 22500 11.0 88.1
5000 – 5999.99 5500 2 101 1.9 98.1 11000 5.4 93.5
6000 – 6999.99 6500 2 103 1.9 100 13000 6.5 100
Σ - - 103 (n) - 100 - 204500 100 -
13
Example 16: Continuation of example 15, 8
of 17
• CR, concentration, from top to bottom, largest to smallest.

Farmland g’ Z=s/s Z’
(hectare) (%) = 30.8
0 – 999.99 23.3 5.8 5.8
1000 – 1999.99 64.1 30.8 36.6
2000 – 2999.99 78.7 18.3 54.9
3000 – 3999.99 91.3 22.2 77.1
4000 – 4999.99 96.2 11.0 88.1
5000 – 5999.99 98.1 5.4 93.5
6000 – 6999.99 100 6.5 100
Σ - - 100 -
14
Example 16: Continuation of example 15, 9
of 17
• CR, concentration, from top to bottom, largest to smallest.

Farmland g’ Z=s/s Z’
(hectare) (%) = 30.8
0 – 999.99 23.3 5.8 5.8
= 30.8 + 22.2 = 53
1000 – 1999.99 64.1 30.8 36.6
2000 – 2999.99 78.7 18.3 54.9
3000 – 3999.99 91.3 22.2 77.1
4000 – 4999.99 96.2 11.0 88.1
5000 – 5999.99 98.1 5.4 93.5
6000 – 6999.99 100 6.5 100
Σ - - 100 -
15
Example 16: Continuation of example 15, 10
of 17
• CR, concentration, from top to bottom, largest to smallest.

Farmland g’ Z=s/s Z’
(hectare) (%) = 30.8
0 – 999.99 23.3 5.8 5.8
= 30.8 + 22.2 = 53
1000 – 1999.99 64.1 30.8 36.6
2000 – 2999.99 78.7 18.3 54.9 = 53 + 18.3 = 71.3
3000 – 3999.99 91.3 22.2 77.1
4000 – 4999.99 96.2 11.0 88.1
5000 – 5999.99 98.1 5.4 93.5
6000 – 6999.99 100 6.5 100
Σ - - 100 -
16
Example 16: Continuation of example 15, 11
of 17
• CR, concentration, from top to bottom, largest to smallest.

Farmland g’ Z=s/s Z’
(hectare) (%) = 30.8
0 – 999.99 23.3 5.8 5.8
= 30.8 + 22.2 = 53
1000 – 1999.99 64.1 30.8 36.6
2000 – 2999.99 78.7 18.3 54.9 = 53 + 18.3 = 71.3
3000 – 3999.99 91.3 22.2 77.1 = 71.3 + 11 = 82.3
4000 – 4999.99 96.2 11.0 88.1
5000 – 5999.99 98.1 5.4 93.5
6000 – 6999.99 100 6.5 100
Σ - - 100 -
17
Example 16: Continuation of example 15, 12
of 17
• CR, concentration, from top to bottom, largest to smallest.

Farmland g’ Z=s/s Z’
(hectare) (%) = 30.8
0 – 999.99 23.3 5.8 5.8
= 30.8 + 22.2 = 53
1000 – 1999.99 64.1 30.8 36.6
2000 – 2999.99 78.7 18.3 54.9 = 53 + 18.3 = 71.3
3000 – 3999.99 91.3 22.2 77.1 = 71.3 + 11 = 82.3
4000 – 4999.99 96.2 11.0 88.1
5000 – 5999.99 98.1 5.4 93.5
= 82.3 + 6.5 = 88.8
6000 – 6999.99 100 6.5 100
Σ - - 100 -
18
Example 16: Continuation of example 15, 13
of 17
• CR, concentration, from top to bottom, largest to smallest.

Farmland g’ Z=s/s Z’
(hectare) (%) = 30.8
0 – 999.99 23.3 5.8 5.8
= 30.8 + 22.2 = 53
1000 – 1999.99 64.1 30.8 36.6
2000 – 2999.99 78.7 18.3 54.9 = 53 + 18.3 = 71.3
3000 – 3999.99 91.3 22.2 77.1 = 71.3 + 11 = 82.3
4000 – 4999.99 96.2 11.0 88.1
5000 – 5999.99 98.1 5.4 93.5
= 82.3 + 6.5 = 88.8
6000 – 6999.99 100 6.5 100 = 88.8 + 5.8 = 94.6
Σ - - 100 -
19
Example 16: Continuation of example 15, 14
of 17
• CR, concentration, from top to bottom, largest to smallest.

Farmland g’ Z=s/s Z’
(hectare) (%) = 30.8
0 – 999.99 23.3 5.8 5.8
= 30.8 + 22.2 = 53
1000 – 1999.99 64.1 30.8 36.6
2000 – 2999.99 78.7 18.3 54.9 = 53 + 18.3 = 71.3
3000 – 3999.99 91.3 22.2 77.1 = 71.3 + 11 = 82.3
4000 – 4999.99 96.2 11.0 88.1
5000 – 5999.99 98.1 5.4 93.5
= 82.3 + 6.5 = 88.8
6000 – 6999.99 100 6.5 100 = 88.8 + 5.8 = 94.6
Σ - - 100 -
= 94.6 + 5.4 = 100
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Example 16: Continuation of example 15, 15
of 17
• Herfindahl-index, HI =
•.
Farmland g’ Z=s/s Z’
(hectare) (%) HI = 0.058^2 + 0.308^2 + . . . + 0.065^2=
0 – 999.99 23.3 5.8 5.8
=
1000 – 1999.99 64.1 30.8 36.6
2000 – 2999.99 78.7 18.3 54.9
3000 – 3999.99 91.3 22.2 77.1
4000 – 4999.99 96.2 11.0 88.1
5000 – 5999.99 98.1 5.4 93.5
6000 – 6999.99 100 6.5 100
Σ - - 100 -
21
Example 16: Continuation of example 15, 16
of 17
• Herfindahl-index, HI =
•.
Farmland g’ Z=s/s Z’
(hectare) (%) HI = 0.058^2 + 0.308^2 + . . . + 0.068^2=
0 – 999.99 23.3 5.8 5.8
= 0.2
1000 – 1999.99 64.1 30.8 36.6
2000 – 2999.99 78.7 18.3 54.9 Ranges of HI:
3000 – 3999.99 91.3 22.2 77.1
4000 – 4999.99 96.2 11.0 88.1
• The concentration is lower than medium.
5000 – 5999.99 98.1 5.4 93.5
6000 – 6999.99 100 6.5 100
Σ - - 100 -
22
Example 16: Continuation of example 15, 17
of 17
Farmland g’ Z=s/s Z’
(hectare) (%)
0 – 999.99 23.3 5.8 5.8
1000 – 1999.99 64.1 30.8 36.6
2000 – 2999.99 78.7 18.3 54.9
3000 – 3999.99 91.3 22.2 77.1
4000 – 4999.99 96.2 11.0 88.1
5000 – 5999.99 98.1 5.4 93.5
6000 – 6999.99 100 6.5 100
Σ - - 100 -

The Lorenz curve shows less than

medium concentration. 23
Thank you for your esteemed attention!

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