9.1 AG. There are a number of industries that have high levels of market concentration in the United States. Wholesalers and supercenters, department stores, and cigarette and tobacco production are three such industries. The data provided are market shares from firms in these industries, reported by IBIS World Database; hypothetical firms are added in cases where 100 percent of the market is not reported.

Use these data to complete the following steps and answer the following questions. Place your answers in the cells provided.

a. For each industry, find the four-firm concentration ratio (CR4). Recall from Chapter 9 that this concentration ratio equals the sum of the market shares of the four largest firms in the market. Which industry appears most concentrated based on this measure?

b. For each industry, find the Herfindahl–

Hirschman Index (HHI). Recall from Chapter 9 that this index is the sum of the squared market shares for every firm in the market.

Which industry appears most concentrated based on this measure?

c. In which industry would the Department of Justice be most likely to allow a merger?

d. Suppose that Nordstrom and Hudson’s Bay decide to merge. What would the new CR4 and HHI for department stores be if the merger goes through? Would antitrust agencies be likely to challenge this merger?

Explain your answer.

e. Return to the original data, and repeat part d for Macy’s and Sears. Would antitrust agencies be likely to challenge this merger?

Explain your answer.

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A B 14 a. Wholesalers 15 16 17 Department Cigarettes Most Concentrated 18 b. Wholesalers 19 20 21 22 c. Department Cigarettes Most Concentrated 23 d. CR 24 222 25 HHI Challenge? 26 e. CR4 27 28 HHI Challenge? 20