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Economics

Consider two alternative markets, each with three firms:

• In market A firms have shares 3/7,3/7,and1/7;90.

In market B firms have shares 3/8, 3/8,and 2/8.

a) Compute the HHI for each market. Which market is more concentrated?

b) Show that the above market shares correspond to the equilibria in the following situation:

• The three firms produce homogeneous goods for a market with demand
Q(p) =1- p ;

• Firms 1 and 2 have cost functions C (q ) = q2 and firm 3 has cost function
C3 (q3 ) = 0.5q3 ;

• In case A firms compete by independently and simultaneously setting quantities; in case B firms 1 and 2 are colluded

c) What sort of limitation on the HHI does this ex suggest?

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M952807

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