Suppose an industry that has 10 firms. Below are the market shares for 2008 and
ID: 1212862 • Letter: S
Question
Suppose an industry that has 10 firms. Below are the market shares for 2008 and 2013 of the 10 firms.
Market Share
Firms
2008
2013
A
B
C
D
E
F
G
H
I
G
26%
21%
16%
10%
9%
7%
4%
3%
2%
2%
22%
23%
19%
9%
8%
7%
6%
4%
1%
1%
Calculate the concentration ratio CR4 and the concentration ratio CR8 for 2008 and 2013
Calculate the Herfindahl-Hirschmann Index (HHI) for 2008 and 2013
Using the CR4, CR8, and HHI, analyze the evolution of the seller concentration in the industry. Has the industry become more or less concentrated?
Using the CR4, CR8, and HHI, analyze the evolution of the potential market power of firms in the industry.
Market Share
Firms
2008
2013
A
B
C
D
E
F
G
H
I
G
26%
21%
16%
10%
9%
7%
4%
3%
2%
2%
22%
23%
19%
9%
8%
7%
6%
4%
1%
1%
Explanation / Answer
CR4 for year 2008 = 26 + 21 + 16 + 10
CR4 for year 2008 = 73%
CR4 represent the concentration ration of the market capture by four largest firm.
CR8 for year 2008 = 26 + 21 + 16 + 10 + 9 +7 + 4 + 3
CR8 for year 2008 = 96%
CR8 represents the market share capture by eight largest firms.
CR4 for year 2013 = 22 + 23 +19 + 9
CR4 for year 2013 = 73%
CR8 for year 2013 = 22 + 23 +19 + 9 + +8 + 7 + 6 + 4
CR8 for year 2013 = 98%