4. Nine Industries with Characteristics of Monopolistic Competition 7605 13 8 5 Miscellaneous plastic products 3089 Source: U.S. Department of Commerce, Bureau of the Census, 1992 Census of Manufacturers, Concentration Ratios in Manufacturing, Subject Series MC92-S-2, 1997. 3943 30 17 11 Women’s dresses 2335 518 41 22 14 Blowers and fans 3564 600 47 28 19 Fresh or frozen seafood 2092 1004 48 32 22 Curtains and draperies 2391 2504 62 38 23 Book publishing 2731 611 51 34 26 Wood office furniture 2521 204 67 47 34 Dolls 3942 270 72 57 41 Travel trailers and campers 3792 NUMBER OF FIRMS TWENTY LARGEST FIRMS EIGHT LARGEST FIRMS FOUR LARGEST FIRMS INDUSTRY DESIGNATION SIC NO. Percentage of Value of Shipments Accounted for by the Largest Firms in Selected Industries, 1992
5. Product Differentiation, Advertising, and Social Welfare Source: McCann Erickson, Inc., Reported in U.S. Bureau of the Census, Statistical Abstract of the United States , 1999, Table 947. 200.3 Total 10.4 Magazines 14.5 Radio 12.0 Yellow pages 31.7 Other 39.5 Direct mail 48.0 Television 44.2 Newspapers DOLLARS (BILLIONS) Total Advertising Expenditures in 1998
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17. Ten Highly Concentrated Industries 55 95 84 Small arms ammunition 3482 52 98 82 Household refrigerators and freezers 3632 Source: U.S. Department of Commerce, Bureau of the Census, 1992 Census of Manufacturers, Concentration Ratios in Manufacturing, Subject Series MC92-S-2, 1997. 398 91 84 Motor vehicles 3711 42 98 85 Cereal breakfast foods 2043 76 94 86 Electric lamp bulbs 3641 160 98 90 Malt beverages (beer) 2082 8 100 93 Cigarettes 2111 10 99 94 Household laundry equipment 3633 11 99 98 Primary copper 3331 5 100 98 Cellulosic man-made fiber 2823 NUMBER OF FIRMS EIGHT LARGEST FIRMS FOUR LARGEST FIRMS INDUSTRY DESIGNATION SIC NO. Percentage of Value of Shipments Accounted for by the Largest Firms in High-Concentration Industries, 1992
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37. Regulation of Mergers HERFINDAHL- HIRSCHMAN INDEX PERCENTAGE SHARE OF: 40 2 + 20 2 + 20 2 + 20 2 = 2,800 20 20 20 40 Industry D 25 2 + 25 2 + 25 2 + 25 2 = 2,500 25 25 25 25 Industry C 80 2 + 10 2 + 10 2 = 6,600 10 10 80 Industry B 50 2 + 50 2 = 5,000 50 50 Industry A FIRM 4 FIRM 3 FIRM 2 FIRM 1 Calculation of a Simple Herfindahl-Hirschman Index for Four Hypothetical Industries, Each With No More Than Four Firms
38. Department of Justice Merger Guidelines (revised 1984) ANTITRUST DIVISION ACTION Unconcentrated No challenge Moderate Concentration Challenge if Index is raised by more than 100 points by the merger HHI 1,800 1,000 0 Concentrated Challenge if Index is raised by more than 50 points by the merger
Editor's Notes
As new firms enter a monopolistically competitive industry in search of profits, the demand curves of profit-making existing firms begin to shift to the left, pushing marginal revenue with them as consumers switch to the new close substitutes. This process continues until profits are eliminated, which occurs for a firm when its demand curve is just tangent to its average cost curve.
![Monopolistic Competition ,[object Object],[object Object],[object Object],[object Object]](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)