Business, 17.04.2020 03:30 lillysiege

Concentration ratios are used to gauge market structure and thus the degree of competition in an industry. What are the greatest drawbacks of using only these measures to gauge market structure? Concentration measures are limited in their ability to reflect free entry into markets. In addition, concentration measures reflect national markets, which can misrepresent competitiveness in local and regional markets. Concentration measures use revenue instead of profit calculations and fail to account for sunk costs. Concentration measures do not classify all goods produced in an industry and do not count companies that produce services. Concentration measures assume markets are perfectly competitive, when in fact many are not. In addition, concentration measures reflect local markets, which can misrepresent competitiveness in national markets

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