Question

In: Finance

1. Suppose an industry has 4 firms and the firms have 40%, 30%, 20% and 10%...

1. Suppose an industry has 4 firms and the firms have 40%, 30%, 20% and 10% of the market share, what is the HHI index for this industry?

2. If the third and fourth firms in the industry above merge, what is the new HHI index for this industry?

3.What is the largest possible number for HHI index?

4. What is the HHI for the cellular wireless industry?

Solutions

Expert Solution

Q1.Suppose an industry has 4 firms and the firms have 40%, 30%, 20% and 10% of the market share, what is the HHI index for this industry?

Answer:- The HHI is calculated by taking the market share of each firm in the industry, squaring them, and summing the result:

HHI = s1^2 + s2^2 + s3^2 + ... + sn^2 (where s is the market share of each firm expressed as a whole number, not a decimal)

Consider the following hypothetical industry with four total firms:

Firm one market share = 40%

Firm two market share = 30%

Firm three market share = 20%

Firm four market share = 10%

The HHI is calculated as:

HHI = 40^2 + 30^2 + 20^2 + 10^2 = 1,600 + 900 + 400 + 100 = 3,000

Q2.If the third and fourth firms in the industry above merge, what is the new HHI index for this industry?

Answer:- 3rd and 4th firms means 20% and 10%

20^2 + 10^2 = 400+100 = 500 New HHI Index.

Q3. What is the largest possible number for HHI index?

Answer:- The higher the market's concentration (and the lower its competition). If, for example, there were only one firm in an industry, that firm would have 100% market share, and the Herfindahl-Hirschman Index (HHI) would equal 10,000, indicating a monopoly. If, there were thousands of firms competing, each would have nearly 0% market share, and the HHI would be close to zero, indicating nearly perfect competition.

Q4. What is the HHI for the cellular wireless industry?

Answe:- The merger would increase the concentration of the cellular industry in the United States to 3,320, by the HHI scale, up from 2,744 before. But note that even if AT&T does not acquire T-Mobile, the American wireless market is and will remain highly concentrated. HHI for the cellular wirless industry nothing else to become leader of the market.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Question 1 For the dataset: 20, 20, 10, 10, 40, 50, 20, 30, 10, 20, 50,...
Question 1 For the dataset: 20, 20, 10, 10, 40, 50, 20, 30, 10, 20, 50, 60, 20, 30, 50, 20, 30, 40, 30, 30, 30, 50, 40 calculate the max, min, mode, median and mean.(20%) Draw a boxplot with inner and outer fence For the data in part (i), if the value 60 was replaced by 2000, what would you call this value in the dataset? What could be the explanation for such a value? How can you through...
Question 1: Demand in an industry is 1200 – Q/10. There are 20 identical firms in...
Question 1: Demand in an industry is 1200 – Q/10. There are 20 identical firms in a competitive fringe, each with the cost function: C(q) = 1000q + q2 . There is also a dominant firm with the cost function C(q) = b*q, where b is a constant, and b<1000. (a) What is the maximum possible value of b such that the fringe produces zero output? (b) Suppose b=500. Work out the equilibrium price and Consumer Surplus. (c) Suppose b=...
Suppose firms in the steel industry have the following market shares: 52%, 19%, 10%, 7%, and...
Suppose firms in the steel industry have the following market shares: 52%, 19%, 10%, 7%, and 6 firms with 2%. 1. Calculate CR4 and H for this industry. 2. If the third and fourth largest firms merge (ceteris paribus), what is the new CR4 and H? 3. Fiberglass is often used by auto manufacturers as a parts alternative to steel. Suppose as the price of fiberglass rises by 8%, sales of steel rise by 6.5%. What is the cross-price elasticity...
Calculate F Test for given 10, 20, 30, 40, 50 and 5,10,15, 20, 25. For 10,...
Calculate F Test for given 10, 20, 30, 40, 50 and 5,10,15, 20, 25. For 10, 20, 30, 40, 50:
There are 20 firms in a perfectly competitive industry. Ten firms have production function q =...
There are 20 firms in a perfectly competitive industry. Ten firms have production function q = 2L^0.5 while the other ten firms have production function q = 4L^0.5. We label the first type of firms, “low productivity” and the second type of firms, “high productivity.” All firms sell their output at a unit price of P = $1. All firms are price takers in the labor market. Find the profit maximizing demand for labor of the two types of firms....
Given the data {20, 20, 30, 30, 40, 40, 50, 50, 60, 60}, calculate 1. Gini...
Given the data {20, 20, 30, 30, 40, 40, 50, 50, 60, 60}, calculate 1. Gini coefficient using the quintile distribution. 2. Draw the Lorenz curve with proper labels.
Suppose you have a deck of 40 cards, containing 10 red cards and 30 black cards....
Suppose you have a deck of 40 cards, containing 10 red cards and 30 black cards. A player draws 7 cards from the deck and places them into their hand. The remaining deck of 33 cards has 5 red cards and 5 black cards in the top 10 cards. The other 23 cards in the remaining deck are unknown color. What is the probability of the player's hand having 0,1,2,3,4,5 red cards?
4. Tri Co. has the following cost of debt structure (14’) wd 0% 20% 30% 40%...
4. Tri Co. has the following cost of debt structure (14’) wd 0% 20% 30% 40% 50% rd 0.0% 9.0% 10.0% 11.0% 12.0% The market risk premium is 4.5%, the risk free rate is 5%, beta of unleveraged firm is 1.20, Hamada’s equation b= bU [1 + (1 - T)(wd/we)]. T=40%. Please use the above information to answer following questions: a) If the firm uses 50% debt, what is the cost of equity of the firm, based on CAPM model?...
4. Tri Co. has the following cost of debt structure (14’) wd 0% 20% 30% 40%...
4. Tri Co. has the following cost of debt structure (14’) wd 0% 20% 30% 40% 50% rd 0.0% 9.0% 10.0% 11.0% 12.0% The market risk premium is 4.5%, the risk free rate is 5%, beta of unleveraged firm is 1.20, Hamada’s equation b= bU [1 + (1 - T)(wd/we)]. T=40%. Please use the above information to answer following questions: a) If the firm uses 50% debt, what is the cost of equity of the firm, based on CAPM model?...
Consider the following industry that has eight firms with the following market share percentages: 20, 20,...
Consider the following industry that has eight firms with the following market share percentages: 20, 20, 16, 16, 9, 8, 6, and 5. a) Calculate the four-firm concentration ratio for this industry. b) Calculate the Herfindahl-Hirschman index for this industry. c) Calculate the “number equivalent” for the HHI you calculated in part b. Interpret what the value means. d) Now suppose that only the market shares of the top four firms are given for this market (i.e., 20, 20, 16,...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT