Herfindahl index on hypothetical merger

Reference no: EM1371613

There're 10 auto firms in this problem each showing their market share percentage (US auto industry). The proposed merger involves Ford 22% and BMW 1%. It is noted that Ford includes Mercury, Lincoln, Volvo, Jaguar and BMW includes Mini Cooper.The pre merger index involves all ten firms and equals 1,758 according to my calculations from the formula The Post Merger index invoves the now 9 firms as the result of the merger of Ford and BMW. I added 1% to 22% equaling 23% resulting from the merger and added that to the remaining percentages of each of the other 8 firms.The post merger index equaled 1,802. The guidlines say that the Justice Dept. would oppose a merger that had a pre merger index between 1,000-1,800 and resulted in a post H-index which increased by 100+ points.

According to my calculations I wouldn't oppose this merger but I am also instructed to account for other facters concerning market structure and conduct.Other factors given where that the industry has a history of being slow to compete on the basis of price, preferring to compete through product differentiation. However the past two years firms have engaged in fierce price competition to boost sales. Also the barriers to entry are extremely high. The only new firms to arise in the U.S. in the last 50 years have been from other countries. Merger activity has been prevalent in this industry throughout its history. For your reference the firm with the highest percentage on this list is GM(29%).Besides Ford and BMW, GM, DaimlerChrysler, Toyota, Honda, Nissan all have one luxury brand car.GM has 7 other brands i.e.Buick, Pontiac, DaimlerChrysler has other brandsi.e. Dodge Plymouth. The merger of Ford and BMW yeilds 5 brands of luxury cars.I gave all this information because I am confused if any of these factors would influence my preliminary decision as to oppose or accept it. By formular alone I would have to accept the merger based on the numbers in the H-INDEX.can you help me in making the right decision?

Reference no: EM1371613

Questions Cloud

Explain is a company really breaking even if it produces : Explain Is a company really breaking even if it produces and sells at the break-even point and What costs may not be covered

Calculate and plot value for inter-arrival time : Assume instead that there is constant inter-arrival time of 0.01 seconds between each consecutive arriving packet. In this case, calculate and plot value of R_tau (t) versus time in steady state for following cases: (i) tau = 0.1 second, (ii) tau..

What percentage of total spending must president do : What percentage of total spending must president and Congress act upon each year. What accounts for remaining expenditures.

Explain how this code might challenge a project manager''s : Explain how this code might challenge a project manager's decisions and behavior and Discuss how it affects your decisions and behavior.

Herfindahl index on hypothetical merger : There're 10 auto firms in this problem each showing their market share percentage (US auto industry). The proposed merger involves Ford 22% and BMW 1%.

What is profit function of firm for this item : Demand for a certain for item is given q=200-2p. Where q donated amt and p is price per unit. It cost Rs 5 to produce each unit. What is profit function of firm for this item.

Write the program by declaring one-dimensional array : Write the program by declaring one-dimensional array which could be used to hold data for grades (int type) of 10 students. The program will prompt user for numeric grades.

Explain how demand change affects price and quantity : Supposes a perfectly competitive, increasing-cost industry is initially in long-run equilibrium and demand suddenly increases. Explain how demand change affects price and quantity and who benefits from increased demand.

Explain illustrate what is use of each one in economy : Illustrate what are differences and similarities between investment multiplier and a consumption multiplier. Explain how is MPC different than multiplier. Explain illustrate what is use of each one in economy.

User Account

All Pages