Concentration ratio
A concentration ratio (CR) measures market concentration by summing the market shares of the largest firms. The most common is the CR5 (market share of largest 5 firms) or CR4 (market share of largest 4 firms). A higher concentration ratio indicates greater market dominance by few firms.
Real World
The UK banking sector has a CR5 above 80%, with Lloyds, Barclays, HSBC, NatWest, and Santander dominating personal current accounts — a figure regulators used to justify the 2013 Vickers reforms requiring ring-fencing of retail operations.
Exam Focus
State the specific CR figure and link it to market power; examiners expect you to evaluate its limitations (ignores imports, geographic scope, product substitutes).
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