Question

The following table lists the sales of the banks in the area. Bank Name Sales MegaBank...

The following table lists the sales of the banks in the area.

Bank Name

Sales

MegaBank

1,100

City Bank

950

Nationwide Bank

845

Atlantic Bank

785

Bulk Bank

665

Metropolitan Bank

480

American Bank

310

Hometown Bank

260

Urban Bank

140

(a) Please calculate the Herfindahl- Hirschman index and the 4-firm concentration ratio.

(b) Assume that Hometown Bank and Urban Bank, being the two smallest banks in the region, decide to get together and merge. After the merger, what is the 4-firm concentration ratio and the Herfindahl-Hirschman index. Please show your calculations.

(might be easier to solve if you do this in Excel)

(c) Is the government more likely to object to the merger analyzed in (b) or a merger between MegaBank and City Bank? Please explain, without calculating any further ratios.

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