Methodological aspects of assessment the level of industry markets concentration

Abstract

The theoretical and methodological aspects of the assessment of industrial markets concentration level have been investigated. Features of identification of industrial markets and establishment of product, geographical and time boundaries have been considered. It has been concluded that it’s appropriate to determine the product boundaries of the industrial market based on the characteristics of the product, which the consumer perceives as useful properties for satisfaction of his personal needs. It is recommended to implement the methods that allow you to evaluate the degree of goods interchangeability for the consumer (cross elasticity of demand, the small but significant non-transitory increase in price test (the SSNIP test), and correlation of prices of goods over time) and the possibility of interchangeability on the supply side. Geographical boundaries of the industrial market are usually established on the basis of the minimum territory within which the consumer can easily satisfy his demand for a certain product in normal conditions. Time limits of the market cover the period during which the structure of the market, the ratio of demand and supply on it does not change significantly. It has been noted that the analysis of the industrial market with the help of concentration indicators makes it possible to assess the strength of competition and the monopolization level. It also has been mentioned about the impact of the industrial market structure on the concentration level which depends on the number of operating enterprises and their size. It has been emphasized that the very sales volumes are taken into account in the investigation of the industrial market structure but not the amount of goods production as it is done during the industry analysis. It has been recommended to calculate the following indicators of the industrial market concentration level: concentration ratio, four-firm concentration ratio, Herfindahl-Hirschman index, relative concentration ratio, Hall-Tideman index (Rosenbluth index), etc. The need for calculation the relative and absolute indicators of concentration in the process of industrial markets analysis has been mentioned. It has been found out that some difficulties with access to information on the sales volume of goods by all business entities operating in the industrial market may arise during data collection for the calculation of the mentioned indicators. It has been recommended to calculate several concentration indicators at the same time in order to obtain the most accurate and objective results of the analysis