a. Compute the Herfindahl -Hirschman Index (HHI) market concentration rules that guide mergers between companies to...

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a. Compute the Herfindahl -Hirschman Index (HHI) market concentration rules that guide mergers between companies to prevent monopoly creation and to promote competition among firms. Based on the market shares of the companies in the table. the merger of which companies will be highly concentrated ? What ethical rules will be affected based on U.S. antitrust laws and merger guidelines in regard to a highly concentrated market ? HHI before a merger is computed as below: 372+35¹+172+11²=3004 As general rule mergers that increase the HHI by 200 points or greater are highly concentrated markets and they raise antitrust concerns (Krivka, 2016). A merger between Coca-Cola and PepsiCo would yield a market share of 72 %, PepsiCo and Cadbury would have a market share of 52% while Cadbury and Coca-Cola would have a market share of 54%. Upon merging Coca Cola and Pepsi will yield an HHI of 72²+17²+11²=5594, Cadbury and Pepsi will yield an HHI of 542+35² +11²=4262, while Coca Cola and Cadbury will yield an HHI of 54²+35²-11²=4262. 3 2 From the above calculations, all possible mergers will raise the HHI by greater than 200 points. As per the US Justice Department a market with HHI less than 1500 is competitive; HHI between 1500 -2500 is moderately concentrated ; while HHI greater than 2500 is highly concentered A merger between Coca Cola and Pepsi will raise a. Compute the Herfindahl -Hirschman Index (HHI) market concentration rules that guide mergers between companies to prevent monopoly creation and to promote competition among firms. Based on the market shares of the companies in the table. the merger of which companies will be highly concentrated ? What ethical rules will be affected based on U.S. antitrust laws and merger guidelines in regard to a highly concentrated market ? HHI before a merger is computed as below: 372+35¹+172+11²=3004 As general rule mergers that increase the HHI by 200 points or greater are highly concentrated markets and they raise antitrust concerns (Krivka, 2016). A merger between Coca-Cola and PepsiCo would yield a market share of 72 %, PepsiCo and Cadbury would have a market share of 52% while Cadbury and Coca-Cola would have a market share of 54%. Upon merging Coca Cola and Pepsi will yield an HHI of 72²+17²+11²=5594, Cadbury and Pepsi will yield an HHI of 542+35² +11²=4262, while Coca Cola and Cadbury will yield an HHI of 54²+35²-11²=4262. 3 2 From the above calculations, all possible mergers will raise the HHI by greater than 200 points. As per the US Justice Department a market with HHI less than 1500 is competitive; HHI between 1500 -2500 is moderately concentrated ; while HHI greater than 2500 is highly concentered A merger between Coca Cola and Pepsi will raise

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ANSWER The HHI from 3004 to 5594 indicating a highly concentrated market Similarly mergers between C... View the full answer