Asked by Belinda Riojas on Jul 03, 2024
Verified
What would you expect the concentration ratio and Herfindahl index of the Internet search industry to look like?
Herfindahl Index
A measure used to calculate the size of firms in relation to the industry and an indicator of the amount of competition among them; higher values indicate lesser competition.
Concentration Ratio
A measure used in economics to assess the level of competition in an industry by calculating the market share of the largest firms.
Internet Search Industry
A sector of the economy that involves companies which provide technologies and services for searching information on the Internet.
- Grasp the significance of the concentration ratio and Herfindahl index in analyzing market structures.
- Apply knowledge of economics to evaluate the competitive dynamics of the Internet search industry.
Verified Answer
AA
Andreu AlegreJul 08, 2024
Final Answer :
There are a few major firms in the market for Internet searching with Google (63%), Bing (24%), and Yahoo (12%). The concentration ratio for this market is nearly 100% and the Herfindahl index will be significantly large. From the percentages available, we know the Herfindahl index will be in excess of 4,600. The concentration ratio and Herfindahl index describe the market as an oligopoly.
Learning Objectives
- Grasp the significance of the concentration ratio and Herfindahl index in analyzing market structures.
- Apply knowledge of economics to evaluate the competitive dynamics of the Internet search industry.