Rothschild index: .40
Canon's Lerner index: .25
The market structure of the digital cameras in 2006 is oligopoly
A few comparatively larger enterprises with a high level of market concentration make up an oligopoly market structure. In the given example, we see that 5 leading big firms in the digital camera market holds a substantial combined share of 60.9%. Rest others constitute only 40% of the market share. So there are only few dominant large firms and there market concentration is also high. Due to its relatively elastic market share, Canon must closely monitor the price strategies of its rivals.
Absence of large number of firms, large market share of individual firms and freedom to decide the price, does not make it perfectly competitive market structure.
Relatively greater price elasticity and presence of few number of firms and neck to neck competition between the firms, does not make it monopoly market structure
Presence of few but not large number of firms, relatively homogenous products, Greater market concentration of few big firms does not make it monopolistic market structure.
The complete question is : In 2006, the five leading suppliers of digital cameras in the United States were: Canon, Sony, Kodak, Olympus, and Samsung. The combined market share of these five firms was 60.9 percent. The leading firm was Canon, with a market share of 18.7 percent. The own price elasticity for Canon's cameras was -4.0 and the market elasticity of demand was -1.6. Suppose that in 2006, the average retail price of a Canon digital camera was $240 and that Canon's marginal cost was $180 per camera.
Based on this information, calculate the Rothschild index and Kodak's Lerner index.
Instructions: Enter your responses rounded to two decimal places.
Rothschild index:
Canon's Lerner index:
Which type of market structure best describes the digital camera in 2006?
-Perfect competition
-Monopolistic competition
-Oligopoly
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