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In: Economics

Suppose that a small town has six burger shops whose respective shares of the local market...

Suppose that a small town has six burger shops whose respective shares of the local market are (as percentages of all hamburgers sold): 26%, 20%, 18%, 14%, 12%, 10%,

a) What is the four-firm concentration ratio of the hamburger industry and what is the Hirchmann Herfindahl Index (HHI) for the hamburger industry in this town?                                                                      

b) Assume that the largest producer now purchases the third largest firm (based market share) so that this new combined firm has the same market share as old firm 1 and old firm 3 combined. Compute the new four-firm concentration ratio and to the new HHI?

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Expert Solution

Rahul Sunny answered 5 months ago
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