Section Suppose we observe the following market shares Cell

Section Suppose we observe the following market shares Cell Phone Video Game Carriers 34 Beer 51 36 13 48 29 16 16 9 Calculate the C4 and HHI for each industry 0. Which industry is most concentrated according to these measures? Which is least concentrated?

Solution

9) HHI for beer market= (48)^2+(29)^2+(5)^2+(4)^2+(3)^2+(1)^2+(1)^2+(1)^2+(1)^2+(1)^2=3200

HHI for cell phone carries=(34)^2+(33)^2+(16)^2+(16)^2+(1)^2=2758

HHI for video game consoles= (51)^2+(36)^2+(13)^2=4066

10) HHI varies from 0 to 10000. If it is perfectly competitive then each firm has an equal share. So HHI tends to be 0. In the monopoly market, one firm has 100% share. HHI=(100)^2=10000. That is lower value of HHI indicates the market is less concentrated. A higher value of HHI indicates a high concentration

Here the value of HHI is highest in video game console market. So this market is most concentrated. Beer market has the lowest value of HHI so beer market is least concentrated.