The previous discussion in this chapter of political availability and growing resource nationalism is relevant here. If concentrated in the hands of a
small number of companies, supply may be prone to restriction from opportunistic behavior by companies with market power. Market power may
allow a powerful firm to raise prices opportunistically to take advantage of a weak buyer. The Herfindahl-Hirschman Index (HHI) provides a measure of market concentration or power and is used by the U.S. Department of Justice when investigating possible monopolistic behavior. This index is the sum of the squared market shares of all firms in a particular market—for example, an industry with three firms with market shares of 40, 40, and 20 percent would have an index of 402 + 402 + 202 = 3600. Likely index scores range from about 1 to 10,000: the greater the concentration in a market, the higher the index number (and vice versa). The U.S. Department of Justice considers markets with index numbers between 1000 and
1800 to be moderately concentrated and those with numbers greater than 1800 to be concentrated. If a merger leads to an increase of more than 100
points in the index, the Department of Justice presumptively has concerns about possible anticompetitive consequences of the merger (U.S. Department of Justice, "Horizontal Merger Guidelines," available at http://usdoj. gov/atr/public/guidelines/horiz_book/hmg1.html; accessed June 21, 2007).
Unfortunately, lack of sufficient data on company market shares made it impossible for the committee to calculate and evaluate HHIs for the minerals examined in this study. Fourth, the supply of minerals that come significantly from by-product production may be fragile or risky. The key idea here is that the availability of a by-product is determined largely by availability of the main product (e.g., gallium as a by-product of bauxite mining). Thus, by-product production is relatively insensitive in the short term to changes in demand for the by-product. An increase in the demand for and, in turn, the price of a by-product may not result in significant additions to production capacity for the by-product. Likewise, a significant drop in demand for a by-product also may not result in significantly lower by-product production.
small number of companies, supply may be prone to restriction from opportunistic behavior by companies with market power. Market power may
allow a powerful firm to raise prices opportunistically to take advantage of a weak buyer. The Herfindahl-Hirschman Index (HHI) provides a measure of market concentration or power and is used by the U.S. Department of Justice when investigating possible monopolistic behavior. This index is the sum of the squared market shares of all firms in a particular market—for example, an industry with three firms with market shares of 40, 40, and 20 percent would have an index of 402 + 402 + 202 = 3600. Likely index scores range from about 1 to 10,000: the greater the concentration in a market, the higher the index number (and vice versa). The U.S. Department of Justice considers markets with index numbers between 1000 and
1800 to be moderately concentrated and those with numbers greater than 1800 to be concentrated. If a merger leads to an increase of more than 100
points in the index, the Department of Justice presumptively has concerns about possible anticompetitive consequences of the merger (U.S. Department of Justice, "Horizontal Merger Guidelines," available at http://usdoj. gov/atr/public/guidelines/horiz_book/hmg1.html; accessed June 21, 2007).
Unfortunately, lack of sufficient data on company market shares made it impossible for the committee to calculate and evaluate HHIs for the minerals examined in this study. Fourth, the supply of minerals that come significantly from by-product production may be fragile or risky. The key idea here is that the availability of a by-product is determined largely by availability of the main product (e.g., gallium as a by-product of bauxite mining). Thus, by-product production is relatively insensitive in the short term to changes in demand for the by-product. An increase in the demand for and, in turn, the price of a by-product may not result in significant additions to production capacity for the by-product. Likewise, a significant drop in demand for a by-product also may not result in significantly lower by-product production.
