Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 17

Forey, Inc., competes against many other firms in a highly competitive industry. Over the last decade, several firms have entered this industry and, as a consequence, Forey is earning a reLurn on investment that roughly equals the interest rate. Furthermore, the four-firm concentration ratio and the Herfindahl-Hirschman index are both quite small, but the Rothschild index is significantly greater than zero. Based on this informa­tion, which market structure best characterizes the industry in which Forey competes? Explain.