ECON 3411 Study Guide - Oligopoly, Kodak, Horizontal Integration
Document Summary
The four-firm concentration ratio is: the hhi is, the four-firm concentration ratio is 100 percent, if the firms with sales of ,000 and ,000 were allowed to merge, the resulting hhi would increase by 960 to 5,072. Since the post-merger hhi exceeds that under the guidelines (2,500) and the hhi increases by more than that permitted under the guidelines (200), the merger is likely to be challenged. The elasticity of demand for a representative firm in the industry is 1. 6, since: . 28. To see this, solve the lerner index formula for p to obtain: since. , it follows that the markup factor is. That is, the price charged by the firm is 2. 33 times the marginal cost of producing the product: the above calculations suggest price competition is not very rigorous and that the firm enjoys market power. Managers should not specialize in learning to manage a particular type of market structure.
