Consider an industry that has 8 firms with the following market slimes in percen
ID: 1093554 • Letter: C
Question
Consider an industry that has 8 firms with the following market slimes in percentages: 30, 20, 12, 10, 10, 8, 7, and 3. (2). Calculate the CR4 for this industry. (2). Calculate the HHI for this industry. Consider now a second industry that has 8 firms with the following market shares in percentages: 20, 20, 16, 16, 9, 8, 6, and 5. (2). Calculate the CR4 for the second industry. (2). Calculate the IIIII for the second industry. (2). Using your answers in (a)-(d), discuss the advantages of the HHI over the CR4 in a couple of sentences. Be brief and precise and explain in a couple of sentences.Explanation / Answer
A
CR4 Ratio = 30 + 20 + 12 + 10 = 62%
B
HHI = 302 + 202 + 122 + 102 + 102 + 82 + 72 + 32 = 1766
C
CR4 Ratio = 20 + 20 +16 +16 = 72%
D
HHI = 202 + 202 + 162 + 162 + 92 + 82 + 62 + 52 = 1518
E
The HHI uses the market share of all the firms giving a wider picture, unlike CR4 ratio which just uses top four firms ignoring the rest. In the above case, HHI shows that first industry is more concentrated which is contradicted by CR4 ratio.