Which industry is more concentrated according to hhi

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Reference no: EM13180393

Suppose two industries each consist of five firms with the following market shares.

Industry A Industry B
Firm #1 50% Firm #1 25%
Firm #2 20% Firm #2 25%
Firm #3 10% Firm #3 20%
Firm #4 10% Firm #4 20%
Firm #5 10% Firm #5 10%

1. Derive the four-firm concentration ratios for both industries.

2. Compute HHI for both industries.

3. Which industry is more concentrated according to 4-firm concentration ratio?

4. Which industry is more concentrated according to HHI?

5. Which of these measures (HHI and four-firm concentration ratio) can be argued to be a better measure of industrial concentration. Discuss.

Reference no: EM13180393

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