Samuelson and Marks, Questions and Problems
In granting (or prohibiting) proposed acquisitions or mergers in an industry, government regulators consider a number of factors, including the acquisition's effect on concentration, ease of entry into the market, extent of ongoing price competition, and potential efficiency gains. In 2011, T-Mobile agreed to merge with AT&T at an acquisition price or $39 billion. However, facing opposition from the Department of Justice, the companies later abandoned their merger plans. In 2011, AT&T's market share of the U.S. wireless market was 26.6 percent, with T-Mobile 12.2 percent, Verizon 31.3 percent, Spring 11.9 percent, TracFone 5.0 percent, U.S. Cellular 3.1 percent, MetroPCS 2.3 percent, Cricket 1.6 percent, and numerous small providers making up the remaining 4 percent.
a. What would be the effect of the merger on the market's concentration ratio? On the HHI?