Suppose that a small town has seven burger shops whose respective shares of the

Question

Suppose that a small town has seven burger shops whose respective shares of the local hamburger market are (as percentages of all hamburgers sold): 23%, 22%, 18%, 12%, 11%, 8%, and 6%.

What is the four-firm concentration ratio of the hamburger industry in this town?

What is the Herfindahl index for the hamburger industry in this town?

If the top three sellers combined to form a single firm, what would happen to the four-firm concentration ratio and to the Herfindahl index?

The four-firm concentration ratio would be?

The Herfindahl index would be?

Explanation / Answer

a) 75 %

b)0.23^2 + 0.22^2 + 0.18^2 + 0.12 ^2 + 0.11^2 + 0.08^2 + 0.06 ^2 =0.1702

17.02 %

c)four-frim concentration raises to 94 %

herfindahi index would be 0.63^2 +0.12 ^2 + 0.11^2 + 0.08^2 + 0.06 ^2 =0.4334

is 43.34 %

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