Question

The small upstate town of Geneva has 10 burger shops whose respective shares of the local hamburger market are (as percentages of all hamburgers sold): 22%, 20%, 14%, 12%, 10%, 8%, 5%, 4%, 3%, and 2%.

1. Based upon your classification of the market structure of Geneva's hamburger industry, how would you predict that these companies will behave (compete):
   1. What kind of price competition might you observe from these firms?
   2. What kind of non-price competition might you observe from these firms?
2. If the second and third largest hamburger shops merged to form a single firm, what would happen to the 4-firm concentration ratio? Recalculate the 4-firm concentration ratio.
3. If the second and third largest hamburger shops merged to form a single firm, what would happen to the 8-firm concentration ratio? Recalculate the 8-firm concentration ratio.
4. If the second and third largest hamburger shops merged to form a single firm, what would happen to the HHI? Recalculate the HHI.
5. If you were a prosecutor in the Antitrust Division of New York State Attorney General's Office, would you ignore or prosecute said merger? Explain. [NOTE: Even though the proposed merger is intrastate rather than interstate, assume that the from the US Justice Department Guidelines are applicable. See pp 18-19.]
6. What non-quantitative [qualitative] factors might you weigh in deciding to approve or reject the merger?

Answer 1