Question: In 1993 Mattel proposed acquiring Fisher-Price for $1.1 billion. Mattel was a major player in the toy industry, with 11% of the market; Fisher-Price controlled 4% of the toy industry. The other two large firms in the industry were Tyco, with a 5% share, and Hasbro, with a 15% share. In the infant/preschool toy market, Mattel had an 8% share and Fisher-Price had a 27% share. Two other large firms in the infant/preschool industry were Hasbro, with a 25% share, and Rubbermaid, with a 12% share.

a. What are the approximate Hirfindahl indices and 4 firm concentration ratios for the toy industry and the infant/preschool toy industry? (You can assume that the contributions to the Hirfindahl indexes of the remaining firms in the industries are very small).

b. If you were a Mattel economist, which industry (toy or infant/preschool) definition would you want to use if the government challenged the merger? Why?