Question

Exercise 2 Let consider a market composed by firms N = {1,2,3}, with market shares $s_1 = 0.45$, $s_2 =$ 0.25, $s_3 = 0.15$, $s_4 = 0.1$, $s_5 = 0.5$, respectively. Compute the simple concentration ratios ($C_3$) and Hirschman - Herfindahl concentration index ($HHI_3$). If firm 2 loses some market share in favor of the firm 3, what happens to $C_3$ and what to $HHI_3$ (you can also answer without any computation)?

          Exercise 2
Let consider a market composed by firms N = {1,2,3}, with market shares $s_1 = 0.45$, $s_2 =$
0.25, $s_3 = 0.15$, $s_4 = 0.1$, $s_5 = 0.5$, respectively. Compute the simple concentration ratios
($C_3$) and Hirschman - Herfindahl concentration index ($HHI_3$). If firm 2 loses some market
share in favor of the firm 3, what happens to $C_3$ and what to $HHI_3$ (you can also answer
without any computation)?

Exercise 2
Let consider a market composed by firms N = 1,2,3, with market shares s1 = 0.45, s2 =
0.25, s3 = 0.15, s4 = 0.1, s5 = 0.5, respectively. Compute the simple concentration ratios
(C3) and Hirschman - Herfindahl concentration index (HHI3). If firm 2 loses some market
share in favor of the firm 3, what happens to C3 and what to HHI3 (you can also answer
without any computation)?

Added by Raquel C.

Principles of Economics

Gregory Mankiw 8th Edition

Instant Answer

Solved by Expert Bryan Kim

Step 1

The simple concentration ratio Ca is the sum of the market shares of the largest N firms in the market. In this case, N = 3, so we need to sum the market shares of the three largest firms. Ca = s1 + s2 + s3 = 0.45 + 0.25 + 0.15 = 0.85 So the simple concentration Show more…

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Let's consider a market composed of firms N = {1, 2, 3}, with market shares s1 = 0.45, s2 = 0.25, s3 = 0.15, s4 = 0.1, and s5 = 0.5, respectively. Compute the simple concentration ratios Ca and the Hirschman-Herfindahl concentration index (HHI). If firm 2 loses some market share in favor of firm 3, what happens to Ca and HHI?