BUS530 Module 3 Case 1.docx - Running head MANAGERIAL...

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Running head: MANAGERIAL ECONOMICS 1 Trident University International Fairencada Armstead Market Structure and Game Theory Managerial Economics Module 3 Case BUS530: Managerial Economics Dr. John Gaze July 29, 2019
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BUSINESS ANALYTICS AND DECISION MAKING 2 1. For this problem use the Herfindahl Index to compute market concentration: a. 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? Answer: Herfindahl Index = 45 2 + 30 2 +9 2 + 8 2 + 6 2 + 2 2 =3,110. If Apple and Samsung merge: Merging is not allowed under antitrust law if Herfindahl Index increases by more than 200. Therefore, the government cannot allow as Herfindahl Index increases by 2,710. b. 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
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