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Chapter 26: Q. 4 - Problems (page 598)

What is the value of the Herfindahl-Hirschman Index for the industry in Problem 26-2?

Short Answer

Expert verified

The formula can be used to calculate the value of HHI for the industry.

Thus,

HHI=2510

Step by step solution

01

Given information 

The calculated numbers are as follows:

The HHI value for the industry can be calculated.

02

Explanation

13306-26-4P AID: 4470鈭�| 11/12/2014

RID: 3603鈭�16/12/2014

To calculate the value of HHI for the industry, use the following formula:

HHI=S12+S22+S32+S42+Ss2+S62+鈥�.Se2HHI=32+172+62+182+412+132+12+12HHI=9+289+36+324+1681+169+1+1HHI=2510

Thus, HHI=2510

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Most popular questions from this chapter

Characterize each of the following as a positive-sum game, a zero-sum game, or a negative-sum game.

a. You play a card game in your dorm room with three other students. Each player brings \(5to the game to bet on the outcome, winner take all.

b. Two nations exchange goods in a mutually beneficial transaction.

c. A thousand people buy \)1 lottery tickets with a single payoff of $800.

List three products that you think are subject to network effects. For each product, indicate whether, in your view, all or just a few firms within the industry that produces each product experience market feedback effects. In your view, are any market feedback effects in these industries currently positive or negative?

Suppose that the distribution of sales within an industry is as shown in the table.

a. What is the four-firm concentration ratio for this industry?

b. What is the eight-firm concentration ratio for this industry?

If there are 13 "All others" in the industry in Problem 26-1, each of which has a share of sales equal to 1 percent, what is the value of the Herfindahl-Hirschman Index for this industry?

Consider two strategically dependent firms in an oligopolistic industry, Firm A and Firm B. Firm A knows that if it offers extended warranties on its products but Firm B does not, it will earn \(6 million in profits, and Firm B will earn \)2 million. Likewise, Firm B knows that if it offers extended warranties but Firm A does not, it will earn \(6 million in profits, and Firm A will earn\)2 million. The two firms know that if they both offer extended warranties on their products, each will earn \(3 million in profits. Finally, the two firms know that if neither offers extended warranties, each will earn \)5million in profits.

a. Set up a payoff matrix that fits the situation faced by these two firms.

b. What is the dominant strategy for each firm in this situation? Explain.
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