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What is the concentration ratio, n-firm concentration and what are some Malaysian oligopolies?

By MBAecon

An oligopoly is a market structure in which a few firms dominate the industry. These firms have significant market power and can influence prices.

In Malaysia, there are several industries that are considered oligopolies, including:

  1. The telecommunications industry: A few large firms, such as Maxis and Digi, dominate the Malaysian telecommunications market.
  2. The banking industry: A few large banks, such as Maybank, CIMB, and Public Bank, dominate the Malaysian banking market.
  3. The automotive industry: The Malaysian automotive market is dominated by a few large firms, such as Proton and Perodua.
  4. The media industry: A few large media firms, such as Astro and Media Prima, dominate the Malaysian media market.

Oligopolies can have significant market power and can influence prices. They can also lead to less competition and potentially higher prices for consumers. It's worth noting that the level of concentration in an oligopoly can vary over time, as firms enter or exit the market and as market shares shift.

The concentration ratio is a measure of the market share of the largest firms in an industry. It is calculated by adding up the market share of the top firms in the industry and expressing it as a percentage of the total market.


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The n-firm ratio is similar to the concentration ratio, but it includes a specific number of firms rather than the top firms. For example, the 4-firm ratio would include the market share of the top four firms in the industry.

Both the concentration ratio and the n-firm ratio are important because they provide information about the level of competition in an industry. Industries with high concentration ratios or n-firm ratios tend to have less competition, as a few large firms dominate the market. This can lead to higher prices for consumers.

The concentration ratio and the n-firm ratio are related because they both measure the market share of the top firms in an industry. The concentration ratio includes all of the top firms, while the n-firm ratio includes a specific number of top firms. Both ratios can be used to understand the level of competition in an oligopoly.

Evaluating the concentration ratio can provide insights into the level of competition in an industry. A high concentration ratio indicates that a few large firms dominate the market and there is less competition. This can lead to higher prices for consumers and potentially reduce the availability of choices. On the other hand, a low concentration ratio suggests that the industry is more competitive, with many firms operating in the market. This can lead to lower prices and more choices for consumers.

To evaluate the concentration ratio, you would need to gather data on the market share of each firm in the industry. You can then add up the market share of the top firms and express it as a percentage of the total market. For example, if the top three firms in an industry have a market share of 60%, the concentration ratio would be 60%.

Concentration ratios can change over time as firms enter or exit the market and as market shares shift. Therefore, it's important to regularly evaluate the concentration ratio to get a current picture of the level of competition in an industry.

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