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Five brands are competing in the market. Company A has 35,000 units sold at $5.00/unit. It...

Five brands are competing in the market.

  • Company A has 35,000 units sold at $5.00/unit. It sold to 7,000 households in market size of 84,000.
  • Company B has 12,000 units sold and revenues of $54,000 for these units. It sold to 3,000 households in market size of 21,000.
  • Company C has 14,000 units sold at $5.50/unit. The average household purchase was 2 units. Its market size of 105,000.
  • Company D has 5,000 units sold at $6.00/unit. It sold to 833 households in market size of 5,000.
  • Company E has 22,000 units sold and revenues of $126,500 for these units. It sold to 5,500 households in market size of 22,000.

What is the "three firm" concentration revenue ratio value?

Solutions

Expert Solution

Concentration ratio measures the market share of top n firms in an industry. Three-firm concentration ratio which is the sum of market share of top three firms.

Calculation of Revenue of firms
Units Sold Rate Amount in $
Company A    35,000.00 5    175,000.00
Company B    12,000.00 4.5      54,000.00
Company C    14,000.00 5.5      77,000.00
Company D      5,000.00 6      30,000.00
Company E    22,000.00 5.75    126,500.00
Total    462,500.00

Sort the list in descending order, we see that the top three firms are A, E and C. The sum of their sales is $ 378,500 and the sum of sales of all firms is $462,500. This gives us a three-firm concentration ratio of 81.84% (=$378,500/$462,500) which is high.

ekkarill92 answered 3 months ago
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