Indicate two measures to evaluate the concentration in markets

The two most common measures of market concentration are the concentration ratio and the Herfindahl-Hirschman Inded (HHI). The strengths of the concentration ratio is that it is easier to calculate. It is simply the percentage of market output produced by the largest firms in the market, typically the largest four firms. The weaknesses of this measure are that it doesn't consider barriers to entry, only market share. It also does not consider how the output is distributed between the firms in question.

The HHI is a little more cumbersome to calculate. It is the sum of the squares of the individual firm's market shares. The strengths of this measure are that all firms are taken into consideration, so it gives a fuller picture of the market as a whole. Like the concentration ratio, though, it does not take barriers to entry into consideration. A market may not be as competitive as the results of either measure would indicate if new firms are not able to enter the market.