Effect of merger on market concentration ratio

Assignment Help Macroeconomics
Reference no: EM131181636

Samuelson and Marks, Questions and Problems # 2, p. 294.In granting (or prohibiting) proposed acquisitions or mergers in an industry, government regulators consider a number of factors, including the acquisition's effect on concentration, ease of entry into the market, extent of ongoing price competition, and potential efficiency gains. In 2011, T-Mobile agreed to merge with AT&T at an acquisition price or $39 billion. However, facing opposition from the Department of Justice, the companies later abandoned their merger plans. In 2011, AT&T's market share of the U.S. wireless market was 26.6 percent, with T-Mobile 12.2 percent, Verizon 31.3 percent, Spring 11.9 percent, TracFone 5.0 percent, U.S. Cellular 3.1 percent, MetroPCS 2.3 percent, Cricket 1.6 percent, and numerous small providers making up the remaining 4 percent.

a. What would be the effect of the merger on the market's concentration ratio? On the HHI?

b. Antitrust guidelines call for close scrutiny of mergers in moderately concentrated markets (HHI between 1,500 and 2,500) if the resulting HHI increase is more than 100 to 200 points. How would this rule apply to the AT&T merger with T-Mobile? ?How would it apply to a hypothetical merger between T-Mobile and TracFone?

c. AT&T argued that the merger would extend its network, providing more reliable and faster cell phone service (particularly to existing T-Mobile customers who on average have lower-grade service plans at cheaper rates). Market observers were worried that after the merger, AT&T would raise cellular rates to some customer segments. Briefly evaluate these pros and cons

Reference no: EM131181636

Questions Cloud

Why might some employees resist such an approach : Would most employees of small firms welcome or resist a leadership approach that sought their Ideas and involved them in meetings to let them know what was going on?
Which of the two outcomes is more common in the real world : What would it mean for two sellers to act noncooperatively, in a "prisoner's dilemma" manner? What real world examples can you think of? What, instead, would it mean for two sellers to collude? Which of the two outcomes is more common in the real ..
Social controversies regarding gender dysphoria and dsm-5 : Analyze this controversy within the context of how clinicians ethically identify and treat psychiatric conditions.
What makes it difficult to implement policy that you favor : What do you think is the single biggest problem in this area of the economy?
Effect of merger on market concentration ratio : What would be the effect of the merger on the market's concentration ratio? On the HHI?
Explain how peter fever developed and state : Explain how Peter's fever developed and state, with explanation, two benefits of fever. Given that influenza is caused by a virus, why was Peter prescribed an antibiotic
Which sources of assistance did that entrepreneur use : Speak with the owner of a small international company. Which sources of assistance did that entrepreneur use when launching the global initiative?
Characteristics that define public good : What are the two characteristics that define public good? Which of the following are public goods: parks, police services, welfare payment to the poor, space exploration?
What is prisoner dilemma game : What is prisoner's dilemma game? How is it relevant in evaluating the likelihood of cheating in a cartel?

Reviews

Write a Review

Macroeconomics Questions & Answers

  Inflation targeting be a good policy

Why might it be difficult for the Fed to formally adopt inflation targeting?  Would inflation targeting be a good policy for the Fed in the present economic environment

  In using the taylor rule

In using the Taylor Rule as a guideline for monetary policy, what are the pros and cons of using forecasted values of inflation and output rather than observed values of these variables?

  Describe the present economic crisis situation in europe

Describe the present economic crisis situation in Europe.  Why has it been so difficult for the Europeans to find a solution to this problem?   Comment on what implications the crisis may have for the rest of the world if Europeans are not able to ag..

  Long-term federal government budget problems

Question:. Explain why there are long-term Federal government budget problems. Explain why the base-line forecast of the CBO is misleading.

  Derive and compare demand curve

Question based on Derive and compare demand curve,  Derive Ambrose's demand function for peanuts. How does it compare with Johnny's demand curve for peanuts?

  Problem based on utility function

Problem based on  Utility Function - Problem,  Answer and explain the following using a diagram which is completely labeled.

  Laffer curve : tax rate and tax revenue

Question based on Laffer Curve : Tax Rate and Tax Revenue,  Do raising tax rates necessarily raise tax revenue? What factors affect how tax revenue changes when tax rates change?

  Problem - income elasticity of demand

Problem - Income Elasticity of Demand,  Interpret the following Income Elasticities of Demand (YED) values for the following and state if the good is normal or inferior; YED= +0.5 and YED= -2.5

  Positive balance of payment

Question Positive Balance of Payment: "Things will look good for the US if we could just get to where we are consistently running a positive Balance of Payments."

  Effect of recession on the investment curve

Comment on the effect of a recession on the investment curve (only) and on the level of savings, investment, and the equilibrium real interest rate in the financial crisis that hits United States first starting in fall 2007.

  Affect of falling domestic investment on trade surplus and

How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world.

  Crises in the banking sector and bank run

Banking crises crisis decreases depositors' confidence in the banking system. What would be the effect of a rumor about a banking crisis on checkable deposits in such a country?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd