A concentrated market (one in which there is a high value for the n-concentration ratio) is a market in which there are few firms which possess a relatively large market share. This fulfils one of the criterion of an oligopolistic market.

Because the market consists of only a few firms we may assume that there are economies of scale to be had by producing a large output. Due to this a few large firms will be able to exploit these economies of scale and hence will be operating a lower point on their average cost curve. Due to this they may be able to charge their consumers a lower price and hence may be more competitive than if the market consisted of many firms who couldn’t exploit these economies of scale and hence had higher costs which they had to pass on to consumers in the form of higher prices despite the markets theoretically being more competitive. [...]