Problem 1. The ice cream industry is characterized by 8 firms producing identical ice creams. Let si denote the percenta

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Problem 1 The Ice Cream Industry Is Characterized By 8 Firms Producing Identical Ice Creams Let Si Denote The Percenta 1 (44.37 KiB) Viewed 11 times

Problem 1. The ice cream industry is characterized by 8 firms producing identical ice creams. Let si denote the percentage market share of firm i, i = 1, 2,..., 8. It has been recently observed that the market shares are given by Firm i Si 1 2 3 4 5 6 7 8 60% 10% 5% 5% 5% 5% 5% 5% (a) Compute the concentration measure H (Herfindahl Index) for this industry (b) Suppose now firms 6, 7, and 8 merge and become a single firm labeled firm 678. Compute the post-merger concentration measure H. (c) The Merger Guidelines in the United States suggest that a merger should not be challenged if the post-merger and the change in the Herfindahl index H satisfies either • H < 1,000 • 1,000 ≤ H≤ 1,800 and AH < 100, or • H≥ 1,800 and AH < 50 Use these guidelines to determine whether the above merger is likely to be challenged by the Regulation Authority.