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EoS > Part II: Structural Analysis of the Industry II.3. Concentration : Measurement and trends SLIDESHOW 8 > Flashcards

Part II: Structural Analysis of the Industry II.3. Concentration : Measurement and trends SLIDESHOW 8 Flashcards

1
Q

As a reminder, what are the 2 components of seller concentration?

A

1\ Number of firms

2\ Size distribution of firms

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2
Q

What are the 2 components of the definition of the market?

A

1\ Product dimension

2\ Geographic dimension

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3
Q

How de we measure the consumer substitution?

A

Through the cross-price elasticity of demand

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4
Q

What does it mean if the CED is large and positive? (consumption point of view)

A

2 goods are close substitutes in consumption

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5
Q

What does it mean if the CED is large and negative?

A

2 goods are close complements

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6
Q

What does it mean if CED is negative? (production point of view)

A

Goods are substitutes in production

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7
Q

What does geographic market definition refer to?

A

The determination of effect of an increase in the price on a product and the consequences on the demand or supply in another location. Thus, for same product???

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8
Q

What does the word industry stand for?

A

Market’s supply side

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9
Q

What does the word market stand for?

A

Supply/production and demand/consumption

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10
Q

What is the objectives of the NACE?

A

1\ standardize industry definitions
2\ inter-country comparisons
3\ harmonization of competition industrial policy

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11
Q

What are the 2 levels making it possible to measure seller concentration?

A

1\ Geographical boundary

2\ Members of some industry or market

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12
Q

What is the 1st type of seller concentration?

A

The Aggregate Concentration

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13
Q

What does AC reflect and how is it measured?

A

It reflects the importance of the largest firms. And it is measured as the share of the n largest firms in the total sales, assets or employment for the economy

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14
Q

What could happen if AC is high?

A

The economy’s largest firms have opportunities to exert a disproportionate degree of influence over politicians or regulators

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15
Q

What are the Hannah and Kay’s criteria for concentration measures?

A

The market share distribution has an impact on seller concentration

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16
Q

What does the n-firm concentration ratio (CRn) measure?

A

The share of the industry’s n largest firms in some measure of total industry size. Calcul montant/somme des montants

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17
Q

What is the basis of the Herfindahl-Hirschman index?

A

The sum of the squared market shares of all firms in the industry

18
Q

What does it mean if HH=1?

A

Single monopoly producer.
Be careful with the numbers equivalent of the HH index (1/HH) = 1, one dominant firm.
HH = 1/N : N equal-sized firms

19
Q

What is the minimum possible value in an industry?

A

HH = 1/N

–> N equal-sized firms

20
Q

Between the n-firm ration and the HH index, which is the most satisfactory in respect of their ability to satisfy the Hannah and Kay criteria?

A

HH index

21
Q

What is the entropy coefficient?

A

The weighted sum concentration measure. But the weights are inversely related to the firms’ market shares

22
Q

What does it mean if E is small?

A

Highly concentrated industry

23
Q

What does it mean if E is large?

A

Industry with low concentration

24
Q

E=0?

A

Single monopoly producer

25
Q

E = log(N)

A

N equal-sized firms

26
Q

Why is it inconvenient to use E?

A

Because it depends on the number of firms. Solution : Standardized entropy = RE

27
Q

RE = 0

A

Monopoly

28
Q

RE = 1

A

N equal-sized firms

29
Q

What is the variance?

A

A standard measure of dispersion or inequality within any data set

30
Q

High variance?

Low variance?

A

High : inequality

Low : same size firms

31
Q

Why is VL a good provider of measure of inequality across the entire firm size distribution?

A

Log-transformation reduces or eliminates the skewness in the original distribution. VL is unaffected by scaling

32
Q

What does the Lorenz curve show?

A

The variation in the cumulative size of the n largest firms in an industry, as n varies from 1 to N

33
Q

How is the Lorenz curve if all the firms are equal sized?

A

45-degree line

34
Q

How is the Lorenz curve if the size distribution is skewed?

A

Lorenz curve is concave

35
Q

Gini = 1

A

One dominant firm with a market share approaching one

36
Q

G = 0

A

N equal-sized firms

37
Q

What is the Gini coefficient?

A

A measure of inequality in the firm size distribution. (Households incomes)

38
Q

What are the issues with these calculations?

A

Specific industry, which boundary?

39
Q

What if calculations only take in consideration domestic data?

A

Understate the true degree of concentration

40
Q

What if calculations only take in consideration a firm’s reported accounts?

A

Not take account of diversification

EoS (10 decks)

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