Question

1. Calculate the four-firm concentration ratio (C₄) and the Herfindahl-Hirschman index (HHI) for the iron and steel industry. How do you interpret these measures?

Table 1: Iron & Steel Industry Firms
Company Name	Annual Sales ($ Billions)
ArcelorMittal	$82.5
CITIC	$75.8
POSCO	$65.2
Nippon Steel	$63.7
Baoshan Iron & Steel	$39.6
Vale	$35.3
JFE Holdings	$28.4
Nucor	$22.0

Answer 1

HHI is the sum of squared market shares

Market shares are computed below as share of a firm / total sales

HHI is found to be 1467.21

It is less than 1500 which means market is competitive

C4 is sum of market shares of top 4 firms

C4 = 20 + 18.38 + 15.81 + 15.44

= 69.63%

Company Name	Annual Sales	Market share	Square of Market share
				ArcelorMittal	82.5	20.00	400.00
CITIC	75.8	18.38	337.67
POSCO	65.2	15.81	249.83
Nippon Steel	63.7	15.44	238.47
Baoshan Iron & Steel	39.6	9.60	92.16
Vale	35.3	8.56	73.23
JFE Holdings	28.4	6.88	47.40
Nucor	22	5.33	28.44
Total	412.5	100.00	1467.21