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Macroeconomics - Industrial Economics - Essay Example

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NAME GRADE 3rdMAY 2012 Part 1 year 2000 2001 2002 2003 2004 2005 Buena Warner Universal Sony Paramount 20thCentuary Others 15.5 13.1 13.1 13.9 14.9 13.1 16.4 13.9 13.7 11.0 20.0 12.0 11.6 17.8 19.4 19.8 11.7 19.1 9.9 14.2 5.9 16.3 18.5 13.9 17.5 9.3 10.7 12.7 19.3 16.1 12.5 9.2 13.9 9.4 19.6 19.0 16.3 12.5 12.8 10.0 7.6 21.8 CR4 CR6 CR8 57.4 83.6 90.8 59.6 82.2 88.5 72.5 94.1 97.4 66.2 87.3 92.5 61.8 80.4 90.4 60.6 78.2 91.0 Herfindahl 1200 1204 1577 1333 1367 1335 Table 3: Market Shares of Major Distributors, 2000-2005 A concentration ratio measures the total output in an industry produced by a given number of large firms…
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Download file to see previous pages Concentration ratios are calculated depending on the largest firms’ market shares. If 90 percent of industry is produced by four largest firms, then hat indicates an oligopoly and the four firms have a good market share (Curry and George, 1983). At the low end concentration, a zero percent concentration means that there is perfect competition meaning the number of firms is too large that the largest firms have no percentage of the market. On the other hand, 100 percent concentration ratio implies that there is a concentrated oligopoly. It therefore, means, there is monopoly. 0 to 50 percent concentration ratio can be interpreted as a low concentrated industry. In this, oligopoly is at the top while monopolistic competition falls at the bottom. Medium concentration takes a 50 to 80 percent concentration and is considered to be very much oligopolistic. High concentration ranges from 80 to 100 percent concentration (Curry and George, 1983). ...
Concentration ratios of eight firms range from 88.5 to 97.4. Concentrations are on the upper end indicating high oligopoly almost coming to a monopolistic market structure. From the data above, considering the concentration ratios, it shows that in the first two years, there is less oligopoly. It then increases in the year 2002 where it is at highest. Then due to high turnover, there are more firms joining the industry which causes the concentration ratios to lower reducing oligopoly. Herfindahl-Hirschman Index (HHI) is another measure of market concentration. In calculating it, the market split of each company that is competing in the market is squared, then summing the results. It can range from zero to 10,000. The higher the market’s concentration, the closer it is to being a monopoly and the less competitive it is (Curry and George, 1983). Considering the investigations conducted, it showed that the market concentration is highest in the year 2002 which is 1577, and it is lowest in year 2000. This indicates that the market was less competitive in the year 2002 than in 2000 which were more competitive. The competition then increases from 2003, goes down in the following year then starts to decline again. Since the market’s results ranges from 1,000 to 1,800, it can be termed as a moderately concentrated market. We can therefore, conclude that it has some oligopoly. To what extent do the major studios - those named in the CR4, CR6 and CR8 indices - outperform the market? In the economic model, competition among firms that are rivals reduces profits to zero. But competition is imperfect and firms are not price takers. Industry concentration is used to measure rivalry. A high concentration ratio shows most of the ...Download file to see next pagesRead More
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