Industry sales for laptops are 10 Billion dollars Apples sal

Industry sales for laptops are 10 Billion dollars. Apple’s sales are 3 billion, HP has sales of 2 Billion and Asus and Dells sales are 1 billion each. Apple’s elasticity of demand is -5 and the elasticity of demand for the industry as a whole is -4. Calculate the 4 firm concentration issue, The HHI and the Rothchild index.

Solution

Four firm concentration ratio = Sum of market shares of top four firm

= (3/10) + (2/10) + (1/10) + (1/10)

= 70%

HHI = Squared sum of market shares

= ((3/10)*100)^2 + ((2/10)*100)^2 + ((1/10)*100)^2 + ((1/10)*100)^2

= 1500

Rothchild index = Elasticity of market demand/Elasticity of largest Firm = -4/-5 = 0.8.