Carrot Computers and its competitors purchase touch screens for their handheld c
ID: 1165186 • Letter: C
Question
Carrot Computers and its competitors purchase touch screens for their handheld computers from several suppliers. The six makers of touch screens have market shares of, respectively, 21 percent, 16 percent, 13 percent, 17 percent, 21 percent, and 12 percent. Instructions: Enter your answers as whole numbers. a. What is the Herfindahl index for the touch screen manufacturing industry? b. By how much would a proposed merger between the two smallest touch screen makers increase the Herfindahl index? Would the government be likely to challenge that proposed merger? (Click to select c. If Carrot Computers horizontally merges with its competitor Blueberry Handhelds, by how much would the Herfindahl index change for the touch screen industry?Explanation / Answer
a) HHI = 212 + 162 + 132 + 172 + 212 + 122
= 441 + 256 + 169 + 289 + 441 + 144
= 1740
b) Market share after merger of two smallest firm = 12 + 13 = 25%
New HHI = 252 + 212 + 162 + 172 + 212
= 625 + 441 + 256 + 289 + 441
= 2052
HHI increases by 2052 - 1740 = 312
Since it is a moderately concentrated market ( because HHI is in between 1500 - 2500), so government would not challenge the merger.
Thus, the answer to the blank is NO.
c) HHI will not change. Because merger of buyers will not affect HHI.