Calculate the Concentration ration (CR4) and Herfindahl-Hirschman index (HHI) for each industry. Which industry has the most monopoly power and which industry has the least monopoly power based on HHI? If the sixth firm in the aviation industry sought to merge with the fifth firm in that industry, would the government be likely to challenge the merger? Find post-merger HHI and compare with pre-merger HHI Market Share of Firms in Industry (F) Industry F1 F2 F3 F4 F5 F6 Herfindahl index CR4 Aviation 25 20 15 15 15 10 Textiles 25 25 25 15 10 - Chemicals 40 15 15 15 15 - Computers 35 25 20 10 10 - Automotive 33 22 14 12 10 9
In the table below are data on five different industries and the market shares for each of the firms in the industry. Assume that there is no foreign competition, entry into the industry is difficult, and that no firm in each industry is on the verge of bankruptcy.
Calculate the Concentration ration (CR4) and Herfindahl-Hirschman index (HHI) for each industry. Which industry has the most monopoly power and which industry has the least monopoly power based on HHI?
If the sixth firm in the aviation industry sought to merge with the fifth firm in that industry, would the government be likely to challenge the merger? Find post-merger HHI and compare with pre-merger HHI
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Market Share of Firms in Industry (F) |
||||||||
|
Industry |
F1 |
F2 |
F3 |
F4 |
F5 |
F6 |
Herfindahl index |
CR4 |
|
Aviation |
25 |
20 |
15 |
15 |
15 |
10 |
|
|
|
Textiles |
25 |
25 |
25 |
15 |
10 |
- |
|
|
|
Chemicals |
40 |
15 |
15 |
15 |
15 |
- |
|
|
|
Computers |
35 |
25 |
20 |
10 |
10 |
- |
|
|
|
Automotive |
33 |
22 |
14 |
12 |
10 |
9 |
|
|
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