In the market for local bus services in the UK, the ﬁve-ﬁrm concentration ratio was found to be 69 per cent. Only another ﬁve companies had a share of the market which exceeded 1 per cent. Given this information, which of the following statements is most likely to be true?

Question

Quizplus · Accepted Answer

The high concentration ratio (69%) among the top five firms and the fact that only another five companies have a market share exceeding 1% suggest that the market is dominated by a few large firms, which is often a result of high sunk costs acting as barriers to entry for new competitors. This does not necessarily imply the total number of firms is very high, that there is head-to-head competition, or that the quality of services is high.

In the Market for Local Bus Services in the UK