For this problem use the Herfindahl Index to compute market concentration:

1. Suppose Apple has 45% of the U.S. market share for smartphones, followed by Samsung with 30%, LG with 9%, Motorola with 8%, HTC with 6%, and Nokia with 2%.What is the Herfindahl Index for the smartphone industry based on these numbers? Based on the Herfindahl Index, do you think the government would be willing to approve a merger between Apple and Samsung?

Now suppose Nokia and Motorola come out with a new smartphone that takes away a huge chunk of market share from Apple and Samsung. The new market shares are 25% for Apple, 20% for Samsung, 20% for Motorola, 20% for Nokia, 10% for LG, and 5% for HTC.