The Herfindahl-Hirschman Index (HHI), a commonly accepted measure of market concentration. If the value of the HHI is less than 1,000, the Justice Department considers an industry as competitive, or unconcentrated. An index between 1,500 and 2,500 is considered representative of a moderately concentrated industry, and an index greater than 2,500 is representative of a highly concentrated industry. If a transaction increases the HHI by more than 200 points in highly concentrated markets, the Justice Department is likely to take antitrust actions. Suppose that in the market for tires, market share is divided among six companies in the following manner: Firm Michelin Goodyear Bridgestone Continental Yokohama Cooper Tires Market Share 40% 35% 15% 5% 3% 2% Before the merger, the value of the Herfindahl index is after the merger, the HHI is 3,238. 3,088, which means that the market for tires is highly concentrated Based on the Herfindahl index of the market for tires, the FTC should not challenge a merger between Bridgestone and Continental. And

The Herfindahl-Hirschman Index (HHI), a commonly accepted measure of market concentration. If the value of the HHI is less than 1,000, the Justice Department considers an industry as competitive, or unconcentrated. An index between 1,500 and 2,500 is considered representative of a moderately concentrated industry, and an index greater than 2,500 is representative of a highly concentrated industry. If a transaction increases the HHI by more than 200 points in highly concentrated markets, the Justice Department is likely to take antitrust actions. Suppose that in the market for tires, market share is divided among six companies in the following manner: Firm Michelin Goodyear Bridgestone Continental Yokohama Cooper Tires Market Share 40% 35% 15% 5% 3% 2% Before the merger, the value of the Herfindahl index is after the merger, the HHI is 3,238. 3,088, which means that the market for tires is highly concentrated Based on the Herfindahl index of the market for tires, the FTC should not challenge a merger between Bridgestone and Continental. And

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter17: Making Decisions With Uncertainty

Section: Chapter Questions

Problem 10MC: You are considering entry into a market in which there is currently only one producer (incumbent)....

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