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CR4+HHI_problem

# CR4+HHI_problem - Problem Set No 3 Addendum In 200X sales...

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Problem Set No. 3 -- Addendum In 200X sales of the car rental industry were \$20 billion. The top companies had the following sales: Hertz: \$4.52 billion, Avis: \$4.08 billion, National: \$3.36 billion, Budget: \$3.12 billion, Dollar: \$1.66 billion and Alamo: \$1.26 billion. There was a fringe of small companies, each with sales of \$200 million. (a) Calculate the four-firm concentration ratio and the Hirschman-Herfindahl index for the car rental industry. (b) According to the 1968 merger guidelines, the Department of Justice (DOJ) said it would challenge a merger in an industry with a CR4 of 75% or more if the "acquiring" firm had at least a 15% market share and the “acquired" firm had at least a 1% market share. Under these guidelines would a merger between Budget and one of the small fringe companies be challenged? Explain. (c) According to the 1996 merger guidelines, DOJ said it would challenge a merger in an industry with an HHI index between 1,000 and 1,800 if the merger would result in a change in the HHI index of 100 points or more. Under these guidelines would a merger

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CR4+HHI_problem - Problem Set No 3 Addendum In 200X sales...

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