The basic purpose of the Concentration ratio or HHI is to measure the dominance of the market.
CR8= 26.6 + 12.2 + 31.3 + 11.9 + 5 +3.1 + 2.3 + 1.6
CR8=94%
When CR8 > 94% it means that the market is facing tight oligopoly.
HHI= (S1)2 + (S2)2 + (S3)2 +........(Sn)2 HHI= (26.6^2) + (12.2^2) + (31.3^2) + (11.9^2) + (5^2) + (3.1^2) + (2.3^2) + (1.6^2) + (4^2) HHI=707.56 + 148.84 + 979.69 + 141.61 +25 +9.61 +5.29 +2.56 +16 HHI=2036.16
Here, HHI is greater than 1500 and lesser than 2500, this means that the market is moderately concentrated.
As the merger is between AT & T and T-mobile the new HHI would be :
HHI= (26.6+12.2^2) + (31.3^2) + (11.9^2) + (5^2) + (3.1^2) + (2.3^2) + (1.6^2) + (4^2)
HHI= (38.8^2) + (31.3^2) + (11.9^2) + (5^2) + …show more content…
This means that the market is highly concentrated. This kind of merger needs to undergo a close investigation. It also increase the market power. In case of AT &T and T-mobile merger, post merger the the market power of AT&T would be enhanced.
For AT&T and T-Mobile merger close scrutiny is definitely required. Now lets see the T-Mobile and Tracfone merger.
HHI= (26.6^2) + (12.2 + 5^2) + (31.3^2) + (11.9^2) + (3.1^2) + (2.3^2) + (1.6^2) + (4^2) HHI=707.56 + 295.84+ 979.69 + 141.61 + 9.61 +5.29 +2.56 +16 HHI=2158.16
After merger the HHI would be increased more than 100 points. This means the market would be moderately concentrated. However this merger would not raise the market power of T-Mobile. This merger also requires detailed investigation as per the Antitrust …show more content…
Now, the next step is to determine whether there is constant-sum game or not.
Constant-sum game is all about getting same payoff for all the players for any outcome. If we look into this table, the payoff is not same for all the players in all the situations. So we would say that there is no existence of constant-sum game for this situation.
We can define the dominant strategy as the strategy which can be the excellent response to any strategy selected by other players in the market. In this case it is difficult to say whether there is dominant strategy or not.
Lets assume that Marginal Revenue (MR) is equal to Marginal Cost (MC).
The equation to calculate MC is= delta TC/deltaQ. Marginal cost shows the effect of change in quantity on cost. Here, we have been given the cost equation. C=900 + 60Q1 + 9Q1^2. In this equation, 900 can be considered as a fixed cost. So we would consider only variable cost.
MC=dTC/dQ
MC=60 + 18Q1
To calculate MR lets assume that P=MR P= 660-16Q1 When we put MR=MC, we should double the value of Q1 = MR= 660-32Q1 MR=MC 660-32Q1=60+18Q1 660-60=18Q1+32Q1 600=50Q1
CR8= 26.6 + 12.2 + 31.3 + 11.9 + 5 +3.1 + 2.3 + 1.6
CR8=94%
When CR8 > 94% it means that the market is facing tight oligopoly.
HHI= (S1)2 + (S2)2 + (S3)2 +........(Sn)2 HHI= (26.6^2) + (12.2^2) + (31.3^2) + (11.9^2) + (5^2) + (3.1^2) + (2.3^2) + (1.6^2) + (4^2) HHI=707.56 + 148.84 + 979.69 + 141.61 +25 +9.61 +5.29 +2.56 +16 HHI=2036.16
Here, HHI is greater than 1500 and lesser than 2500, this means that the market is moderately concentrated.
As the merger is between AT & T and T-mobile the new HHI would be :
HHI= (26.6+12.2^2) + (31.3^2) + (11.9^2) + (5^2) + (3.1^2) + (2.3^2) + (1.6^2) + (4^2)
HHI= (38.8^2) + (31.3^2) + (11.9^2) + (5^2) + …show more content…
This means that the market is highly concentrated. This kind of merger needs to undergo a close investigation. It also increase the market power. In case of AT &T and T-mobile merger, post merger the the market power of AT&T would be enhanced.
For AT&T and T-Mobile merger close scrutiny is definitely required. Now lets see the T-Mobile and Tracfone merger.
HHI= (26.6^2) + (12.2 + 5^2) + (31.3^2) + (11.9^2) + (3.1^2) + (2.3^2) + (1.6^2) + (4^2) HHI=707.56 + 295.84+ 979.69 + 141.61 + 9.61 +5.29 +2.56 +16 HHI=2158.16
After merger the HHI would be increased more than 100 points. This means the market would be moderately concentrated. However this merger would not raise the market power of T-Mobile. This merger also requires detailed investigation as per the Antitrust …show more content…
Now, the next step is to determine whether there is constant-sum game or not.
Constant-sum game is all about getting same payoff for all the players for any outcome. If we look into this table, the payoff is not same for all the players in all the situations. So we would say that there is no existence of constant-sum game for this situation.
We can define the dominant strategy as the strategy which can be the excellent response to any strategy selected by other players in the market. In this case it is difficult to say whether there is dominant strategy or not.
Lets assume that Marginal Revenue (MR) is equal to Marginal Cost (MC).
The equation to calculate MC is= delta TC/deltaQ. Marginal cost shows the effect of change in quantity on cost. Here, we have been given the cost equation. C=900 + 60Q1 + 9Q1^2. In this equation, 900 can be considered as a fixed cost. So we would consider only variable cost.
MC=dTC/dQ
MC=60 + 18Q1
To calculate MR lets assume that P=MR P= 660-16Q1 When we put MR=MC, we should double the value of Q1 = MR= 660-32Q1 MR=MC 660-32Q1=60+18Q1 660-60=18Q1+32Q1 600=50Q1