Eco 502

5-4_problem_set_table x

Complete the following problem :

The attached  table represents the market share of the top eight firms in a hypothetical industry in 2006 and 2011.

• Calculate the four-firm concentration ratios for 2006 and 2011. Analyze the industry changes during this five-year period.
• Calculate the eight-firm concentration ratios for 2006 and 2011. Does this index give you any different indication about changes in the industry over the same period?
• Calculate the Herfindahl-Hirschman Indexes for 2006 and 2011. What information does this index tell you about changes in the industry? How does this information differ from the four-firm and eight-firm indexes?
• Hypothesize what you think might have happened to supply, demand, and price of products in this industry from 2006 to 2011. Use charts, if appropriate, to illustrate your response.

5-4 Homework: Problem Set Data

Firm

Market Share 2006

Market Share 2011

A

10%

32%

B

8%

5%

C

12%

12%

D

20%

29%

E

21%

9%

F

2%

1%

G

5%

4%

H

6%

2%