Firms Industry 1 Industry 2 Industry 3 Industry 4 1 65 70 35 50 2 15 15 35 50 3. 10 10 30 4 Based on the Herfindahl-Hirschman index for each of the industries above, the industry with the most concentration of market power is: Industry 1 Industry 2 Industry 3 Industry 4

Firms Industry 1 Industry 2 Industry 3 Industry 4 1 65 70 35 50 2 15 15 35 50 3. 10 10 30 4 Based on the Herfindahl-Hirschman index for each of the industries above, the industry with the most concentration of market power is: Industry 1 Industry 2 Industry 3 Industry 4

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter15: Oligopoly And Strategic Behavior

Section: Chapter Questions

Problem 9P

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.A measure called Herfindahl-Hirschman Index is used to measure the degree of competition in an industry. The HHI is the square of each firm’s market share summed over the firms in the industry. (Where a market share is the percentage of sales in the market accounted for by that firm). For example, if an industry contains only three firms and their market shares are 60%, 25%, and 15% then the HHI (by squaring each firm’s share and summing them) is 4450. Some economists classify the market structures according to HHI scores. An HHI below 1,500 indicates a strongly competitive market, between 1,500 and 2,500 indicates a somewhat competitive market, and over 2,500 indicates an oligopoly. Given the information in the table, calculate the HHI in this industry. If yahoo and Bing were to merge, what would the HHI be? Google 67% Yahoo 18 Bing 11 Ask 3 AOL 1
The 1994 market shares of the firms in the market for paper towels in the United States were: Procter & Gamble 37%, Scott 18%, James River 12%, Georgia-Pacific 11%, Kimberly-Clark 4%, with the remaining 18% spread among several smaller firms. a. Find the HHI for the market. (Note: you must create imaginary market shares for the firms in “Other” when calculating HHIs. The usual practice is to make the shares as large as possible, given that they are at most as large as the smallest listed firm, which in this case was Kimberly-Clark.) b. One way of putting some intuition behind the HHI is to calculate how many equal-sized firms would generate the HHI of some actual industry. To do so, calculate the HHI in terms of fractional market shares (e.g., use .48 instead of 48%, and do NOT multiply the sum by 10,000). Then, for n equal size firms, the HHI = n(si2) = n(1/n)2 = 1/n. Find the number of identical-sized firms that would generate the HHI you found in part a.
Calculate the Herfindahl-Hirshman Index given the following market shares: Company Market Share Visa 60% Mastercard 30% American Express 10%
Captain Catahoula and Bow Wow Wonder are two of the four firms in the dog food industry. Before they notify the Federal Trade Commission and the Department of Justice of their plans to merge, Captain Catahoula hires you to determine the concentration of this industry. Use the table to calculate the Herfindahl–Hirschman Index (HHI) for this dog food industry and then complete the sentence. Firm Industry Bow Wow Wonder 10% Waggin' Tails 34% Mongrel Munchies 16% Captain Catahoula 40% What is the HHI for this dog food industry? HHI: You report that this industry is .
Consider a market with four firms. Suppose the first firm has a 39% market share, the second firm has a 30% market share, the third firm has a 20% market share, and the fourth firm has a 11% market share. Using the Herfindahl-Hirschman Index (HHI), what is this market's level of concentration? Now suppose the third and fourth firms propose to merge. Were they to merge, then the market's HHI would increase to? Given the increase in the HHI that would be caused by the proposed merger, would the government likely allow such a merger to occur?
1.Microsoft is one of the leading software companies. Prior to 2000, Microsoft’s share of the market for personal computer operating systems stood above 80 per cent. However, since the twenty-first century Microsoft’s market share has steadily declined to 40 per cent. This is due to the rise in competing software producers such as Apple macOS (10%), Google's Android OS (35%), Linux Operating System (35%), and Apple iOS (5%). The market share of each company is provided in parentheses. Google and Linux have decided that it would be in their best interest to work together to serve the market. This is not common knowledge to the person’s outside of the companies. i. Draw how equilibrium price and quantity are determined in this industry. Hi does this refer to the monopoly market structure diagrams? 2. Allsmart’s demand curve is given by Q=10-P for its dishwashers. The marginal and average cost is $3 per dishwasher produced. Complete the following table. Photo below concerns…
Industry A is composed of three firms. One has an 80% market share, and the other two have a 10% share each. The Herfindahl index for this industry is:
Industry A consists of four firms, each of which has an equal share of the market. Compute the Herfindahl-Hirschman index for the industry. Industry B consists of 10 firms, each of which has an equal share of the market. Compare the Herfindahl–Hirschman Indexes for the two industries. Now suppose that there are 100 firms in the industry, each with equal shares. What is the Herfindahl-Hirschman index for this industry? State the general relationship between the competitiveness of an industry and its Herfindahl-Hirschman index
The two major scooter companies in India, ABC and XYZ, are competing for a fixed market. If both manufacturers make major model changes in a year, then their percentage market share not change. Also, if they both do not make major model changes, their percentage market share remains constant. If ABC makes a major model change and XYZ does not, then ABC is able to take away a% of the market away from XYZ, and if XYZ makes a major model change ABC does not, XYZ is able to take away b% of the market away from ABC. Express this as a 2 x 2 game and solve for the optimal strategy for each of the companies.
A market is dominated by five firms, each with an equal share of market sales. What is the Herfindahl-Hirschman Index for this market?
Suppose that there are 8 firms in a market, 3 firms produce 90% of the goods (each produces 30%) and 5 small firms produce the remaining 10% of the output (each produces 2%) (1) What is the value of the Herfindahl-Hirshman index in this market? Please show all your calculation. Points will be deducted if there is only a number without middle steps. Hint: it would be a number between 0 and 1. (2) A market is considered as "concentrated" if its HHI is greater than 0.18 and "highly concentrated" if HHI is greater than 0.25. Based on your calculation in the last question, what would you say about the market?
A student in a managerial economics class calculated the four-firm concentration ratio and HHI for industries A and B. What is the proper conclusion she can draw from the following findings? Industry A Industry B Four-Firm C 0.9 1 HHI 3,200 2,500 Multiple Choice C4 is higher for industry A while the HHI is higher for industry B. This inconsistency must be due to a calculation error. The market power of firms in industry A is greater than that in industry B. Neither industry is perfectly competitive. Industry B is a monopoly.