See attached The task here is to calculate HHI for year 2015

See attached. The task here is to calculate HHI for year 2015 and the present year. Describe how HHI has changed. Then, create a scenario where Time Warner Cable and Dish network merge and recalculate HHI. Evaluate the change in HHI and make a recommendation about the risk of FTC intervention in this potential merger. You need to evaluate market concentration

please calculate HHI for 2015 and present, and describe how HHI changed.

FILE HOME INSERT PAGE LAYOUT FORMULASc PROTECTED VIEW Be careful-email attachments can contain viruse F11 Households Households (Current (2015)Survey) Service 2 Time Warner Cable 3 At&T; U-Verse 4 Dish Network 5 Direct TV 6 Google Fiber 75,625 56,815 14,940 19,650 74,520 58,140 14,650 19,850 1,150 8 Households with Servic 167,030 0 No Service 2 Total Households 168,310 17,520 185,830 16,650 183,680 8 *No service indicates that the household does not 9 currently subscribe to a mult-channel video provider. of these households, 68.4% indicated that they did subscribe to one or more Internet-based services such as Netflix or Hulu. In the 2015 survey, the same response was 63.2%. 5 6 9 2

Solution

To assess the market power one best way is to measure the concentration within a particular market. The concentration is measured by the means of the concentration ratio. The concentration ratio is given by the percentage of output produced by the four largest firms in an industry. The higher the concentration ratio the greater will be the concentration in the industry.

However, both the Justice department and the FTC both prefer to measure called the Herfindahl-Hirschman Index (HHI). The HHI is measured by taking the square for each firm’s share of market sales summed over the firms in the industry. An HHI below 1000 is very competitive, HHI between 1000 and 1800 are somewhat competitive and HHI above 1800 is called oligopoly.

The table below gives the HHI for communication market:

Thus the HHI for both period is quite high and above 1800. Then the market is an oligopoly.

The marger of the said firms changes the market as

The HHI increases to 4139. This increases concentration to 40%. Then the marger is near monopoly. The marger should be prevented and this calls for a  FTC intervention in this potential merger.

	HOUSEHOLD	MARKET PERCENTAGE
	2015	Current	2015	Current
TWC	75625	74520	45.3	44.3
AT&T	56815	58140	34.0	34.5
DN	14940	14650	8.9	8.7
DT	19650	19850	11.8	11.8
GF	0	1150	0.0	0.7
TOTAL	167030	168310
HHI			3425.4	3368.4