Concentration ratios

Calculating an n-firm ratio

An n-firm concentration ratio is the combined market share of the n largest firms:

CRn = sum of the market shares of the largest n firms

Shares may be given as percentages, or as sales figures that you convert: share = firm's sales / total market sales x 100. A 4-firm ratio of 70% is written CR4 = 70%, or sometimes as 4:70 (four firms, 70% of the market).

Interpreting it

• A high ratio (a commonly used rule of thumb is a 4- or 5-firm ratio above about 50 to 60%) suggests an oligopoly.
• A low ratio suggests many firms and more competition.
• A single firm with a very large share suggests a dominant firm or monopoly.

Real data: GB grocery 2025

Worldpanel by Numerator (formerly Kantar) shares for the 12 weeks to 10 August 2025, as reported by Grocery Gazette: Tesco 28.4%, Sainsbury's 15.0%, Asda 11.8%, Aldi 10.8%, Morrisons 8.4%, Lidl 8.3%, Ocado 1.9%.

So CR3 = 55.2% and CR4 = 66.0%: GB grocery retailing is an oligopoly.

Limitations

• It says nothing about the shares within the top n: CR4 = 80% could be 20/20/20/20 or 77/1/1/1.
• It depends on how the market is defined (national or local; groceries or all retail).
• It ignores imports and potential entrants (contestability), and does not show behaviour: firms in a concentrated market may still compete hard on price.

Worked example

Five firms have market shares of 32%, 21%, 14%, 9% and 6%; the rest of the market is 18%. Find the 3-firm and 4-firm concentration ratios.

1. CR3 = 32 + 21 + 14 = 67%.
2. CR4 = 67 + 9 = 76%.

Answer: CR3 = 67%, CR4 = 76%: an oligopoly.

Check yourself

1. Using the 2025 GB grocery shares (Tesco 28.4%, Sainsbury's 15.0%, Asda 11.8%, Aldi 10.8%, Morrisons 8.4%, Lidl 8.3%), find the 5-firm concentration ratio.
   Show answer

   74.4 %. 28.4 + 15.0 + 11.8 + 10.8 + 8.4 = 74.4%.

2. Using the same 2025 data, find the 2-firm concentration ratio.
   Show answer

   43.4 %. 28.4 + 15.0 = 43.4%.

3. Total market sales are $800m. The three largest firms sell $260m, $180m and $120m. Find the 3-firm concentration ratio.
   Show answer

   70 %. (260 + 180 + 120) / 800 x 100 = 560 / 800 x 100 = 70%.

4. In a market, CR4 = 64%. What percentage of the market is supplied by all other firms together?
   Show answer

   36 %. 100 - 64 = 36%.

5. A market has a 5-firm concentration ratio of 85%. It is most likely
   • perfectly competitive
   • monopolistically competitive with thousands of firms
   • an oligopoly
   • a monopsony
   Show answer

   an oligopoly. A few firms supply most of the market.

6. Which is a limitation of concentration ratios?
   • They do not show how market share is divided among the largest firms
   • They cannot be calculated from sales data
   • They always overstate competition
   • They measure profit rather than share
   Show answer

   They do not show how market share is divided among the largest firms. Equal shares and one dominant firm can give the same CR4.

7. A concentration ratio is most affected by
   • the price elasticity of demand
   • the rate of inflation
   • how the market is defined
   • the level of wages
   Show answer

   how the market is defined. A national ratio can be low even when one firm dominates a local area.

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Sources

• Pearson Edexcel International Advanced Subsidiary/Advanced Level in Economics specification (XEC11/YEC11), Unit 3 Business behaviour and Appendices 6 and 7
• Grocery Gazette, 19 August 2025: Worldpanel by Numerator (formerly Kantar) GB grocery market shares, 12 weeks to 10 August 2025
• Pearson Edexcel IAL Economics WEC13/01 mark scheme, January 2021

Last updated 8 November 2026. Spotted a mistake? Tell us.