Question

1. Estimates market shares for the aerospace/defense companies are given in the table below. Calculate the four-firm concentration ratio and the HHI. Recalculate these measures of industry concentration if Goodrich were to purchase Cordant Technologies. (2 points)

Boeing	44%
Lockheed Martin	20%
Norththrop Grumman	8%
General Dynamics	8%
Goodrich	6%
Cordant Technologies	4%
Gulfstream Aerospace	4%
Plus 6 more firms with 1% each

Answer 1

1) The two measures are as under:

Four firm concentration ratio = addition of market shares of four largest firms

= 44 + 20 + 8 + 8

= 80%

HHI = summation of squares of market share of each firm

= 1936 + 400 + 64 + 64 + 36 + 16 + 16 + 6

= 2538

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2) If Goodrich purchases Cordant technologies, combined market share is 10%

Four firm concentration ratio = addition of market shares of four largest firms

= 44 + 20 + 10 + 8

= 82%

HHI = summation of squares of market share of each firm

= 1936 + 400 + 100 + 64 + 64 + 16 + 6

= 2586