4. With an estimated market share of 60%, Atlas is the dominant company and the price leader in an oligopolistic steel industry. The remaining market share is distributed equally between ten companies. Suppose that one of those ten companies, Norton, attempts to gain market share by undercutting the price set by Atlas. Calculate the “Four Firm Ratio” and Herfindahl-Hirschman Index “HHI” in the above-described market and interpret your answer. What model can best resemble this market? Briefly explain this model. In your opinion, what will be the effect of Norton’s attempt described above on Atlas’s market share: will it increase, decrease, or not affected at all? Justify your answer.
4. With an estimated market share of 60%, Atlas is the dominant company and the price leader in an oligopolistic steel industry. The remaining market share is distributed equally between ten companies. Suppose that one of those ten companies, Norton, attempts to gain market share by undercutting the price set by Atlas. Calculate the “Four Firm Ratio” and Herfindahl-Hirschman Index “HHI” in the above-described market and interpret your answer. What model can best resemble this market? Briefly explain this model. In your opinion, what will be the effect of Norton’s attempt described above on Atlas’s market share: will it increase, decrease, or not affected at all? Justify your answer.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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4. With an estimated market share of 60%, Atlas is the dominant company and the price leader in
an oligopolistic steel industry. The remaining market share is distributed equally between ten
companies. Suppose that one of those ten companies, Norton, attempts to gain market share by
undercutting the price set by Atlas.
Calculate the “Four Firm Ratio” and Herfindahl-Hirschman Index “HHI” in the above-described
market and interpret your answer. What model can best resemble this market? Briefly explain
this model. In your opinion, what will be the effect of Norton’s attempt described above on
Atlas’s market share: will it increase, decrease, or not affected at all? Justify your answer.
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