Question

Let us assume that in a market for PCs, Lenovo has a market share of 30%,...

Let us assume that in a market for PCs, Lenovo has a market share of 30%, Dell 25%, HP 20%, Toshiba

20% and Samsung 5%. Calculate the 4-firm concentration ratio and the Herfindahl-Hirschman Index for

the market. Is this market an oligopoly or competitive according to each of these two measures?

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Answer #1

4-firm concentration = sum of top 4 firms having highest market share

=Lenovo+Dell+HP+Toshiba

=30%+25%+20%+20%

= 95%

The four firm ratio being 95 % shows olgopolistic nature of market

HHI:

Market Share Square of each market share
Lenovo   30% 900
Dell 25% 625
HP 20% 400
Toshiba 20% 400
Samsung 5% 25
2350

An HHI value less than 1500 means it is competitive, 1500 to 2500 to be moderatly competitive, greater than 2500 is highly concentrated. So the value of 2350, means the market is moderatly competeitive or oligopolistic market.

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