204_summer_2009_lecture_12

204_summer_2009_lecture_12 - University of Toronto...

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University of Toronto Department of Economics ECO 204 Summer 2009 Sayed Ajaz Hussain Lecture 12 1 Ajaz Hussain. Department of Economics
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Today ± Market structure ± Market “boundaries” ± Measures of market concentration ² Concentration Ratio (CR n ) ² Herfindahl Hirschman Index (HHI) ± HHI and mergers 2 Ajaz Hussain. Department of Economics
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Market Structure Ajaz Hussain. Department of Economics 3 Number of Firms Relative Size of Firms (Concentration) Technological & Cost Conditions Demand Conditions Barriers to Entry and Exit Market
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Market Boundary ± To gauge: ² Number of firms ² Market concentration we need to know the market boundary ± That is: ² Which products (do not) compete with each other? ± Example: ² Soft drinks industry ² Which products compete with “soft drinks”? Ajaz Hussain. Department of Economics 4
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Market Boundary ± Estimated demands for Coke and Pepsi: ± Estimated demands based on quarterly data from 1968 to 1986: ² Q – quarterly quantity of syrup sold ² P – price of syrup (1986 dollars) ² A – square root of quarterly advertising expenses (1986 dollars) ² S – equals 1 if spring or summer, equals 0 if winter or fall ² I–rea l income (1986 dollars) ² Average values from data: Q C = 30.22, Q P = 22.72 , P C = 12.96, P P = 8.16, A C = 5.89, A P = 5.28, I = 20.63 Source : Gamsi, Laffont, and Vuong, “Econometric Analysis of Collusive Behavior in a Soft Drink Market,” Journal of Economics and Management Strategy , Summer 1992.
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This note was uploaded on 05/02/2011 for the course ECO 204 taught by Professor Hussein during the Fall '08 term at University of Toronto- Toronto.

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204_summer_2009_lecture_12 - University of Toronto...

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