The four-firm concentration ratio (CR4) and the eight-firm concentration ratio (CR8) are metrics used to assess market concentration, providing insights into the competitive dynamics of an industry. Both ratios measure the combined market share of the largest firms within a market, but they differ in the number of firms they include.

The CR4 ratio calculates the total market share of the four largest firms in an industry. This metric is useful for identifying the degree of market power held by the top competitors. A high CR4 ratio indicates that the four largest firms dominate the market, suggesting an oligopolistic market structure. For example, if the CR4 ratio is 75%, it means that the top four firms control 75% of the market, leaving only 25% to smaller competitors. This high concentration can imply reduced competition and potential barriers to entry for new firms.

The CR8 ratio, on the other hand, measures the combined market share of the eight largest firms. This provides a broader view of market concentration, capturing the influence of additional competitors. A high CR8 ratio indicates a less competitive market but includes a wider array of firms compared to the CR4 ratio. For instance, a CR8 ratio of 85% suggests that the eight largest firms have significant market control.

While both ratios offer valuable insights, the choice between CR4 and CR8 depends on the level of detail and the specific industry being analyzed. CR4 focuses on the market dominance of the top tier, while CR8 provides a more comprehensive picture of market concentration.