Resources for Courses
SA
RE M
SO PL
E
U
RC
E
New
A Level
Economics
Concentration Ratio Pyramids
Resources for Courses
Teacher Instructions
The purpose of this activity is to test students’ knowledge of real world UK oligopolistic
markets and to calculate a 5-firm concentration ratio and Herfindahl–Hirschman Index
(HHI) for each market. On completion of the calculations, a discussion can be lead
on the value of the HHI compared to the concentration ratio method.
The data on these sheets are the most up-to-date as of August 2015.
SA
RE M
SO PL
E
U
RC
E
Running the Activity
Hand out the student worksheets (pages 3 to 6 of this pack). Inform students that
their initial task is to use their knowledge of the 6 markets stated and work out the
firms who have the greater market share in each market.
Each market shows 7 firms. The students must decide the order that the firms should
be written into the pyramid diagram (using 6 of the 7 firms). So, number 1 is the firm
with the highest market share and number 6 is the firm with the 6th highest market
share. On completion of the task the students will be given the answers and can
calculate their score.
They will be awarded 2 points if they write the firm with the highest market share
into box 1. They will get a point if they get the other firms in the right level of pyramid
(i.e. get the 2nd and 3rd in the second level and the 4th, 5th and 6th in the 3rd level).
They get a further point if they get the firm in the exact right box (e.g. 2nd highest
market share in box 2).
They repeat this for all 6 markets.
For the second part of the activity, hand out the market share sheets (sheets 7 and 8).
They can use these sheets to calculate how they have done.
Students then need to complete these sheets to calculate the 5 firm concentration
ratio for each market and then the HHI for each market. Answers are provided at the
end of this pack.
Concentration Ratio Pyramids
Resources for Courses
Student Instructions
How much do you know about the markets in the UK? You are about to presented
with the names of 7 firms involved in 6 major oligopolistic markets in the UK.
Your first task is to use your knowledge to try and make an educated guess on who
has the largest market share in each market.
SA
RE M
SO PL
E
U
RC
E
For each market, input the names of 6 of the listed firms into the pyramid on the left
hand side of the page. Each box has a number (1 to 6), so you should attempt to put
the firm with the largest market share in box 1, the second largest market share in
box 2 and so on until you have filled in all of the boxes.
Complete this for all 6 markets. You will then be able to work out your score when
you see the real results. Your score (per market) will be calculated thus:
You will be awarded 2 points if you write the firm with the highest market share into
box 1. You will get a point if you get the other firms in the right level of pyramid (i.e.
get the 2nd and 3rd in the second level and the 4th, 5th and 6th in the 3rd level). You
get a further point if you get the firm in the exact right box (e.g. 2nd highest market
share in box 2). Calculate your score for each market.
The correct answers are given to you on another sheet. These sheets also have
spaces for you to calculate the 5 firm concentration ratio and the Herfindahl–
Hirschman Index (HHI) for each market.
To calculate the 5 firm concentration ratio you simply add the market shares for the
top 5 firms in each market. The larger the number, the less competitive the market.
To calculate the Herfindahl–Hirschman Index (HHI) you need to divide the market
share for each firm by 100 and then square the result. Having done this for the top
5 firms in each market, calculate the HHI by adding the top 5 firm’s index numbers
together. This will give you a number between 0 and 1. Again, the higher the number
the less competitive the market is. However, this time, the HHI adds weight to firms
that have particularly high market shares. If one or two firms dominate the market
you can argue that the market is less competitive than if you have 5 firms with
roughly 15% of the market share.
soft drinks
1
Coca Cola
Innocent
Lucozade
Pepsi
Robinsons
Tropicana
Volvic
3
SA
RE M
SO PL
E
U
RC
E
2
Manufacturer
4
5
6
My Score
National Newspapers
1
2
4
Newspaper
Daily Express
Daily Mail
Daily Mirror
Daily Star
Daily Telegraph
Evening Standard
The Sun
3
5
6
My Score
Car Manufacturers
1
BMW
Audi
Ford
Mercedes-Benz
Nissan
Vauxhall
Volkswagon
3
SA
RE M
SO PL
E
U
RC
E
2
Manufacturer
4
5
6
My Score
Broadband Providers
1
2
4
Company
BT
EE
Plusnet
Sky
Talk Talk
Virgin Media
Zen
3
5
6
My Score
Supermarkets
1
Aldi
Asda
Morrisons
Sainsburys
Tesco
The Co-operative
Waitrose
3
SA
RE M
SO PL
E
U
RC
E
2
Company
4
5
6
My Score
High Street Banks
1
2
4
Company
Barclays
HSBC
Lloyds Group
Nationwide
RBS
Santander
TSB
3
5
6
My Score
Soft drinks
No Firm
1 Coca Cola
Market Share
14.7
2
Pepsi
7.1
3
Lucozade
3.4
4
Robinsons
2.8
5
Volvic
2.7
6
Tropicana
1.6
HHI Calc
SA
RE M
SO PL
E
U
RC
E
5 firm Concentration ratio/ HHI index
National Newspapers
No Firm
1 The Sun
Market Share
24.1
2
Daily Mail
20.6
3
Daily Mirror
12.1
4
Evening Standard
9.8
5
Daily Telegraph
6
Daily Express
HHI Calc
6
5.6
5 firm Concentration ratio/ HHI index
Car Manufactures
No Firm
1 Ford
Market Share
12.82
2
Vauxhall
11.64
3
Volkswagon
9.18
4
BMW
6.99
5
Nissan
6.12
6
Audi
5.44
5 firm Concentration ratio/ HHI index
HHI Calc
Broadband providers
No Firm
1 BT
Market Share
32
2
Sky
22
3
Virgin Media
20
4
Talk Talk
14
5
EE
4
6
Plusnet
2
HHI Calc
SA
RE M
SO PL
E
U
RC
E
5 firm Concentration ratio/ HHI index
Supermarkets
No Firm
1 Tesco
Market Share
28.5
2
Sainsburys
16.5
3
Asda
16.4
4
Morrisons
10.9
5
The Co-operative
6.3
6
Aldi
5.6
HHI Calc
5 firm Concentration ratio/ HHI index
High Street Banks
No Firm
1 Lloyds Group
Market Share
27
2
RBS
18
3
Barclays
17
4
HSBC
12
5
Santander
10
6
Nationwide
6
5 firm Concentration ratio/ HHI index
HHI Calc
Soft drinks
No Firm
1 Coca Cola
Market Share
14.7
HHI Calc
0.0216
2
Pepsi
7.1
0.005
3
Lucozade
3.4
0.001
4
Robinsons
2.8
0.0008
5
Volvic
2.7
0.0008
6
Tropicana
1.6
30.7
0.0293
SA
RE M
SO PL
E
U
RC
E
5 firm Concentration ratio/ HHI index
National Newspapers
No Firm
1 The Sun
Market Share
24.1
HHI Calc
0.058
2
Daily Mail
20.6
0.042
3
Daily Mirror
12.1
0.014
4
Evening Standard
9.8
0.009
5
Daily Telegraph
6
0.004
6
Daily Express
5 firm Concentration ratio/ HHI index
5.6
72.6
0.128
Market Share
12.82
HHI Calc
0.052
Car Manufactures
No Firm
1 Ford
2
Vauxhall
11.64
0.004
3
Volkswagon
9.18
0.029
4
BMW
6.99
0.101
5
Nissan
6.12
0.004
6
Audi
5.44
5 firm Concentration ratio/ HHI index
46.75
0.190
Broadband providers
No Firm
1 BT
Market Share
32
HHI Calc
0.102
2
Sky
22
0.048
3
Virgin Media
20
0.04
4
Talk Talk
14
0.0196
5
EE
4
0.002
6
Plusnet
2
92
0.212
SA
RE M
SO PL
E
U
RC
E
5 firm Concentration ratio/ HHI index
Supermarkets
No Firm
1 Tesco
Market Share
28.5
HHI Calc
0.081
2
Sainsburys
16.5
0.027
3
Asda
16.4
0.026
4
Morrisons
10.9
0.012
5
The Co-operative
6.3
0.004
6
Aldi
5.6
5 firm Concentration ratio/ HHI index
78.6
0.151
Market Share
27
HHI Calc
0.027
High Street Banks
No Firm
1 Lloyds Group
2
RBS
18
0.032
3
Barclays
17
0.028
4
HSBC
12
0.014
5
Santander
10
0.01
6
Nationwide
6
5 firm Concentration ratio/ HHI index
84
0.158