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    Herfindahl-Hirschman Index For Passenger Car Segment in India

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    Shreeni Yeshodharan
    The passenger car segment in India has high concentration according to the Herfindahl-Hirschman Index (HHI) calculation. The HHI was calculated to be 2649.19 using the market shares of top car companies in India. An HHI over 2500 indicates high concentration. The passenger car segment in India is dominated by a small number of major producers and has an oligopolistic market structure.

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    Herfindahl-Hirschman Index For Passenger Car Segment in India

    Uploaded by

    Shreeni Yeshodharan
    696 views4 pages
    The passenger car segment in India has high concentration according to the Herfindahl-Hirschman Index (HHI) calculation. The HHI was calculated to be 2649.19 using the market shares of top car companies in India. An HHI over 2500 indicates high concentration. The passenger car segment in India is dominated by a small number of major producers and has an oligopolistic market structure.

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    HERFINDAHL-HIRSCHMAN INDEX FOR PASSENGER CAR SEGMENT IN INDIA

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    HERFINDAHL-HIRSCHMAN INDEX FOR PASSENGER CAR SEGMENT IN INDIA

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    The passenger car segment in India has high concentration according to the Herfindahl-Hirschman Index (HHI) calculation. The HHI was calculated to be 2649.19 using the market shares of top car companies in India. An HHI over 2500 indicates high concentration. The passenger car segment in India is dominated by a small number of major producers and has an oligopolistic market structure.

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    696 views4 pages

    Herfindahl-Hirschman Index For Passenger Car Segment in India

    Uploaded by

    Shreeni Yeshodharan
    The passenger car segment in India has high concentration according to the Herfindahl-Hirschman Index (HHI) calculation. The HHI was calculated to be 2649.19 using the market shares of top car companies in India. An HHI over 2500 indicates high concentration. The passenger car segment in India is dominated by a small number of major producers and has an oligopolistic market structure.

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    of 4

    ASSIGNMENT

    ON
    HERFINDAHL-HIRSCHMAN INDEX
    FOR
    PASSENGER CAR SEGMENT IN INDIA.

    Presented To:

    Presented By:

    Prof. M Mallikarjun

    Shreeni Yeshodharan
    Section: C
    Roll No: 141344
    Managerial Economics

    Overview- Passenger Cars segment in India:


    Pre-liberalization, the auto industry in India was dominated by Hindustan Motors and Premier.
    Things started to change in 1980s with the Government adopting policies to promote the automobile
    industry. The de-licensing of the industry in 1993 led to a rush of international auto-makers as they
    fought to capture the last remaining un-tapped major market. The next couple of years saw an
    unprecedented growth in the. Till today the industry has grown enormously, with a number of new
    companies vying for a piece of the huge market.

    Sales figures for Passenger Cars:

    Source- http://www.team-bhp.com/forum/indian-car-scene/148656-february-2014-indian-car-sales-figures-analysis.html

    Passenger Car Sales in Feb 2014


    Volkswagen; 1.65 Nissan; 0.94 Skoda; 0.62 Fiat; 0.61
    Ford;
    3.19 1.93
    Renault;
    Tata;
    5.32
    Chevrolet;
    2.63
    Toyota;
    Honda;
    6.83 4.74
    Mahindra; 8.7
    Hyundai; 15.97

    Maruti ; 46.86

    Herfindahl-Hirschman Index (HHI):


    The Herfindahl-Hirschman Index is a commonly accepted measure of market concentration. It is
    calculated by squaring the market share of each firm competing in a market, and then summing the
    resulting numbers. The HHI number can range from close to zero to 10,000. The HHI takes into
    account the relative size distribution of the firms in a market. It approaches zero when a market is
    occupied by a large number of firms of relatively equal size and reaches its maximum of 10,000
    points when a market is controlled by a single firm. The HHI increases both as the number of firms in
    the market decreases and as the disparity in size between those firms increases.
    The HHI is expressed as:
    HHI = s1^2 + s2^2 + s3^2 + ... + sn^2 (where sn is the market share of the ith firm).
    For example, for a market consisting of four firms with shares of 30, 30, 20, and 20 percent, the HHI
    is 2,600 (302+ 302 + 202 + 202 = 2,600).
    A HHI index below 0.01 (or 100) indicates a highly competitive index.
    A HHI index below 0.15 (or 1,500) indicates an unconcentrated index.
    A HHI index between 0.15 to 0.25 (or 1,500 to 2,500) indicates moderate concentration.
    A HHI index above 0.25 (above 2,500) indicates high concentration.
    Hence, in the above example, the market would be considered to be a high concentration market.

    HHI Calculations for Passenger Cars segment in India:


    Using the formula for HHI and taking the market share from the table, we haveHHI= 46.862 + 15.972 + 8.72 + 6.832 + 5.322 + 4.742 + 3.192 + 2.632 + 1.932 + 1.652 + 0.942 + 0.622 +
    0.612 + 02 = 2649.19
    Thus, the HHI is above 2,500, indicating a market having high concentration.

    Market Structure:

    Perfect competition - a market structure that has an unlimited number of producers.

    Monopolistic competition - a type of imperfect competition such that many producers sell
    products that are differentiated from one another (e.g. by branding or quality) and hence are not
    perfect substitutes.

    Oligopoly- a market is run by a small number of firms that together control the majority of
    the market share.

    Duopoly - a market run by two firms.

    Monopoly- a market where there is only one provider of a product or service.

    Thus, the market structure for the passenger car segment can be said to be oligopoly.

    Sourceshttp://www.justice.gov/atr/public/guidelines/hhi.html
    http://en.wikipedia.org/

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