Question

A) In Optometry, how many firms are there in the industry in the U.S.? What do you estimate is the percentage of sales accounted for by the four largest firms? (Be sure to use the Census Bureau’s ratios of industry concentration to help answer and to incorporate into your audit.

B) Are there examples of nonprice competition in your industry? Illustrate.

Answer 1

According to data from the census Bureau's Annual survey of Entrepreneurs there were 5.6 million employer firms in the United States in 2016. Firms with fewer than 500 workers accounted for 99.7 percent of those businesses. Firms with fewer than 100 workers accounted for 98.2 percent. Firms with fewer than 20 workers made up 89.0 percent.

Add in the number of nonemployer businesses- there were 24.8 million in 2016- then the share of U.S businesses with less than 20 workers increases to 98.0 percent.

C-corps: Among employer C corporations in 2015, according to the census Bureau's Statistics of U.S businesses, 84.9 percent had fewer than 20 employees, 96.4 percent fewer than 100, and 99.0 percent had less than 500 workers. If we add in nonemployer corporations, then those with fewer than 20 workers come in at 89.5 percent of all C corporations.

A four-firm concentration ratio is one way of measuring the extent of competition in a market. We calculate it by adding the market shares- that is the percentage of total sales of the four largest firms in the market. A Herfindahl-Hirschman Index ( HHI) is another way of measuring the extent way of competition in a market.

Non-price competition is an important strategy in market places where sellers are offering their service as a product such as AirBnB, Fiverr, oDesk, Taskrabbit, Mechanical Turk, etc. In these market placesplaces, suppliers tend to distinguish themselves in terms of customers satisfaction, speed of delivery, quality etc..