Please write text form Question 6. Market Concentration Consider an industry with three firms. F1 has a

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Question 6. Market Concentration Consider an industry with three firms. F1 has a market share of s₁= 60 percent, F2 has a market share of s₂ = 30 percent, and F3 has a market share of 53 = 10 percent. 1. What is the HHI in this market? 2. Suppose that F1 merges with F2. Assuming that the post-merger market share of the merged firm equals the sum of the original market shares of the merging firms, what will be the HHI after the merger? 3. Now suppose that instead F2 merges with F3. Again assuming that the market share of the merged firm is equal to the sum of the market shares of merging firms, what will be the new HHI? 4. Assuming that market concentration, as measured by the HHI, is a good measure of market power, about which of these potential mergers should the DOJ be more concerned? Question 6. Market Concentration Consider an industry with three firms. F1 has a market share of s₁= 60 percent, F2 has a market share of s₂ = 30 percent, and F3 has a market share of 53 = 10 percent. 1. What is the HHI in this market? 2. Suppose that F1 merges with F2. Assuming that the post-merger market share of the merged firm equals the sum of the original market shares of the merging firms, what will be the HHI after the merger? 3. Now suppose that instead F2 merges with F3. Again assuming that the market share of the merged firm is equal to the sum of the market shares of merging firms, what will be the new HHI? 4. Assuming that market concentration, as measured by the HHI, is a good measure of market power, about which of these potential mergers should the DOJ be more concerned?

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