Outer Baldonia is a largely rural country with many small towns. Each town typically contains a retail store selling livestock feed. In virtually all towns, there is only one such store. The farmers who purchase feed from these stores typically live outside of town, sometimes at a significant distance. Often, they will purchase from a store in the town closest to them, but if farmers learn through word of mouth that a feed retailer in a more distant town is selling feed at a significantly lower price, they will sometimes go to that store to obtain feed.
The country-wide market shares of the six largest feed stores in Outer Baldonia are shown in the table below:
Firm Market share
Ben's Feed and Supplies ............................. 2%
Joe's Hog and Cattle supply ......................... 1%
Hogwarts................................................ 1%
Dave's Livestock and Tools ......................... 0.50%
Ron's Supply Shed ................................... 0.25%
Eddie's Feed Coop ................................... 0.25%
a. What is the four-firm (4CR) concentration ratio for the livestock feed store market in Outer Baldonia?
b. What is the (approximate) Herfindahl-Hirschman Index (HHI) for this industry?
c. Of the market structures described in Table 13.1, which one best describes the livestock feed market in Outer Baldonia?