Example Of Concentration In The Textbook Publishing Industry Critical Thinking

Leaving the industry’s top four publishers’ shares unchanged and merging the remaining firms to form a single company would not change the four-firm concentration ratios immediately. It will remain at 2,554 as it is before the merger. This is because they will each remain with the same percentage of market share until the new merger takes shape and starts reaping the fruits of the merger. In the long run, therefore, the four-firm concentration ratio may change. The new merger will have a 12% market share which is greater than that of the joint-fourth firm in the current market’s leading firms, Wiley. The HHI, on the other hand, would change since there has been a percentage change in the industry’s market share. The new HHI would be as follows;
HHI = 42 + 122 + 172 +322 + 352
= 2,698
The new HHI will be 2,698. It is 98 points above the current industry concentration ratio. The change in the industry concentration ratio is due to a change in the count of individual publishing companies in the industry and their market shares.
In the event that the textbook publishers switched from determining their production and prices non-cooperatively and started colluding, the textbook prices are likely to rise. This is because when oligopolistic firms start colluding they can reduce their production and raise their prices in order to make high profits. They normally start behaving like monopolies. If the firms start working collusively, the prices paid for textbooks is, therefore, going to increase and the production levels will most likely drop to a monopoly’s level. Generally, when oligopolistic firms collude, they tend to act as a monopoly company.