Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Market shares in the U.S. cigarette industry are as follows. Cigarette Company Market Share (Percent) Altria 50 Reynolds 35 Vector 5 Republic 4 three smallest

Market shares in the U.S. cigarette industry are as follows.

Cigarette Company

Market Share (Percent)

Altria

50

Reynolds

35

Vector

5

Republic

4

three smallest companies

      each 2

Total

100

1. 1. Define the four-firm concentration ratio of an industry. Compute the four-firm concentration ratio for the cigarette industry. Show your computation.

2. Define the Herfindahl-Hirschman index (HHI). Compute the HHI for the cigarette industry. Show your computation.

3. The cigarette industry is often described as a “duopoly.” Explain how this description makes sense, even though there are more than two firms in the industry.

4. According to the U.S, government, what is the classification of the cigarette industry in terms of “concentration”? Explain your answer.

5. (a) Suppose that Altria and Reynolds explore a merger of the two companies. Is this merger likely to be approved by the U.S. government? Explain your answer using the HHI concept.

    (b) Instead of Altria and Reynolds merging, suppose that the three smallest companies decide to merge. Is this merger likely to be approved by the U.S. government? Explain your answer using the HHI concept.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

1 The fourfirm concentration ratio of an industry is the percentage of total industry sales accounted for by the four largest firms in the industry It measures the market power and dominance of these ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Global Marketing

Authors: Svend Hollensen

8th Edition

1292251808, 9781292251806

More Books

Students also viewed these Economics questions