Concentration Ratios

In addition to those directly engaged in business, both government and the public share an interest in the number and size distribution of competitors. A small number of competitors can sometimes have direct implications for regulation and antitrust policy. Thus, considerable public resources are devoted to monitoring both the size distribution and economic performance of firms in several important sectors of the economy. Among those sectors covered by the economic census, manufacturing is clearly the largest, accounting for approximately 20 percent of aggregate economic activity in the United States. Firm sizes in manufacturing are also much larger than in other major sectors such as retail and wholesale trade, construction, legal and medical services, and so on. Among the more than 16 million business enterprises in the United States, manufacturing is the domain of the large corporation. Thus, the manufacturing sector provides an interesting basis for considering data that are available on the size distribution of firms.

Table 11.5 shows census information on the number of competitors, industry sales, and leading-firm market share data for a small sample of industries. Industries that contain a large number of firms of roughly equal sizes are generally regarded as vigorously competitive. Questions about the intensity of competition sometimes arise when only a limited number of competitors are present, or when only a handful of large firms dominate the industry.

As shown in Table 11.5, the economic census uses two different methods to describe the degree of competitor size inequality within an industry. The most commonly used group measures of leading-firm market share data are calculated from sales information for various

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