ch03 - Market Structure and Market Power Chapter 3: Market...

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Chapter 3: Market Structure and Market Power 1 Market Structure and Market Power
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Chapter 3: Market Structure and Market Power 2 Introduction Industries have very different structures numbers and size distributions of firms ready-to-eat breakfast cereals: high concentration newspapers: low concentration How best to measure market structure summary measure concentration curve is possible preference is for a single number concentration ratio or Herfindahl-Hirschman index
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Chapter 3: Market Structure and Market Power 3 Measure of concentration Compare two different measures of concentration: Firm Rank Market Share Squared Market (%) Share 1 25 2 25 3 25 4 5 5 5 6 5 7 5 8 5 625 625 625 25 25 25 25 25 CR 4 = 80 Concentration Index H = 2,000 25 25 5
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Chapter 3: Market Structure and Market Power 4 Concentration index is affected by, e.g. merger Firm Rank Market Share Squared Market (%) Share 1 25 2 25 3 25 4 5 5 5 6 5 7 5 8 5 625 625 625 25 25 25 25 25 CR 4 = 80 Concentration Index H = 2,000 25 25 5 } } } 10 85 100 2,050 Assume that firms 4 and 5 decide to merge The Concentration Index changes Market shares change
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Chapter 3: Market Structure and Market Power 5 What is a market? No clear consensus
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This note was uploaded on 08/08/2011 for the course EC 170 taught by Professor Menegotto during the Fall '08 term at Tufts.

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ch03 - Market Structure and Market Power Chapter 3: Market...

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