Suppose that currently, Verizon has 30% of the cell phone market, followed by Sprint with 25%, ATT with 20%, and T-Mobile with 15%. Suppose there are 10 other companies, each with 1%. (Each answer worth 1 point)
a. Calculate the Herfendahl Index. (Show your calculations.)
b. How would you characterize the nature of competition in this market?
c. Explain/describe one submarket with distinct competitive pressures.
d. Use Sutton's concept of endogenous sunk costs to explain why it is difficult for new firms to enter this industry.