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Some dominance indices to determine market concentration
Atif Evren1, Elif Tuna1, Erhan Ustaoglu2
1Statistics, Yildiz Technical University, Istanbul, Turkey.
Journal of Applied Statistics
|June 16, 2022
Summary
This study introduces new normalized dominance measures for market concentration analysis. These indices offer improved estimation accuracy and reduced sensitivity to market share variations.
Area of Science:
- Economics
- Market Analysis
- Quantitative Methods
Background:
- Growing concerns about global market concentration.
- Existing concentration/dominance indices (Herfindahl-Hirschmann, Hannah-Kay, Rosenbluth-Hall-Tidemann, Concentration Ratio) have limitations.
- Qualitative variation measures relate to entropy, diversity, and market concentration.
Purpose of the Study:
- To propose two novel normalized dominance measures derived from Wilcox's qualitative variation work.
- To analyze the limiting distributions and asymptotic behaviors of these new indices.
- To compare the performance of proposed indices against existing measures.
Main Methods:
- Derivation of normalized dominance measures from qualitative variation principles.
- Formulation of limiting distributions for the proposed indices.
- Monte Carlo simulations to analyze asymptotic behaviors under various market structures.
- Application to real-world data (Turkish car sales 2019).
Main Results:
- The proposed normalized dominance measures were successfully formulated.
- Simulations revealed the asymptotic behaviors of the indices.
- Application to Turkish car sales demonstrated significant variation in dominance index values.
- One proposed index showed advantages in estimation error, sensitivity to small market shares, and sampling variability.
Conclusions:
- The proposed normalized dominance measures provide valuable insights into market concentration.
- The new indices offer improved statistical properties compared to traditional measures.
- The chosen index demonstrates superior performance for practical market analysis.
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