ECON 101 Lecture Notes - Lecture 23: Average Variable Cost, Clayton Antitrust Act, Price Fixing
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ECON 101 Full Course Notes
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Good information concerning prices and output levels. Easier successfully collude if collectively hold high market share. To avoid problem of cheating some firms merge into single entity. Mergers may reduce costs and increase efficiency. Industries that are more concentrated are better for price fixing. Used by the justice department when evaluating potential mergers. Square each firm"s share of market sales. Add together the squared market shares for all firms in the industry. Takes into account the relative size distribution of the firms in the market. Gives proportionately greater weight to larger market shares. The hhi approaches zero when the market is occupied by a large number of firms of relatively equal size. Hhi reaches its maximum at 10,000 when the industry is occupied by a single firm: monopoly. It"s too dispersed for mergers or any mergers to harm consumers. Hii between 1,500 and 2,500: moderately concentrated market. Justice department considers both post-merger level of hhi and the increase in.
