Suppose the Top Four Automobile Manufacturers in the United States

question 271

Essay

Suppose the top four automobile manufacturers in the United States have the market shares indicated in the following table. Calculate the Herfindahl-Hirschman Index (HHI) and comment on the degree of concentration in this industry. How much trust would you put in the ability of the HHI Index number to capture the degree of market power that these four manufacturers have? Explain.
$\begin{array}{|l|l|}\hline \text { Company } & \text { Market Share } \\\hline \text { A } & 40 \\\hline \text { B } & 20 \\\hline \text { C } & 10 \\\hline \text { D } & 10 \\\hline\end{array}$

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