Question
In: Economics
Explain why the Herfindehl-Hirschman Index (HHI) is superior to the concentration ratio?
Explain why the Herfindehl-Hirschman Index (HHI) is superior to the concentration ratio?
Solutions
Expert Solution
The degree at which total production is made in the market by a
small number of firms is called Concentration.
1. Herfindahl-Hirschman Index is the most common measure to
calculate market concentration.
We can calculate it by adding the square root of the percentage
market share of each firm in the industry.
2. Traditional measure for industry concentration was concentration
ratio in which the market share of some companies of an industry is
simply added.
Herfindahl-Hirschman Index became the standard measure of
industrial concentration in 1982. It is calculated by adding a
squared market share of all the firms of the industry.
ThisIndex has some benefits over concentration ratio-
i). Information regarding the relative size of all the members of
an industry, not only some arbitrary subset of leading companies is
used by this index.
ii). The market share of the largest enterprises is weighted more
heavily.
Rahul Sunny answered 2 days agoRelated Solutions
Explain the difference between a four firm concentration ratio, a Herfindahl-Hirschman Index, a Lerner index, and...
Explain the difference between a four firm concentration ratio,
a Herfindahl-Hirschman Index, a Lerner index, and a Rothschild
index.
Based on the information given below, indicate for each of the
following, whether the industry is best characterized by the model
of perfect competition, monopoly, monopolistic competition, or
oligopoly.
a) Industry A has a four-firm concentration ratio of 0.005% and
an HHI of 75. A representative firm has a Lerner index of 0.45 and
a Rothschild index of 0.34.
b) Industry...
Explain the difference between a four firm concentration ratio, a Herfindahl-Hirschman Index, a Lerner index, and...
Explain the difference between a four firm concentration ratio,
a Herfindahl-Hirschman Index, a Lerner index, and a Rothschild
index.
Based on the information given below, indicate for each of the
following, whether the industry is best characterized by the model
of perfect competition, monopoly, monopolistic competition, or
oligopoly.
a) Industry A has a four-firm concentration ratio of 0.005% and
an HHI of 75. A representative firm has a Lerner index of 0.45 and
a Rothschild index of 0.34.
b) Industry...
Based on the following data, estimate the four firms’ concentration ratio based on the Herfindahl–Hirschman Index....
Based on the following data, estimate the four firms’
concentration ratio based on the Herfindahl–Hirschman Index.
Interpret your results.
1)65, 15, 10, 10
2) 30, 30, 20, 20
1. What are regulatory rules for bank mergers in the US? 2. Herfindahl-Hirschman Index (HHI)?
1. What are regulatory rules for bank mergers in the
US?
2. Herfindahl-Hirschman Index
(HHI)?
A market is considered unconcentrated if the? Herfindahl-Hirschman Index? (HHI) is below 1000 ?(enter your response...
A market is considered unconcentrated if the?
Herfindahl-Hirschman Index? (HHI) is below 1000 ?(enter your
response as an ?integer)?; it is considered highly concentrated if
the? Herfindahl-Hirschman Index? (HHI) is above 1800. its this
correct?
The Herfindahl-Hirschman Index (HHI) tells us a ____________ market structure would have the largest measure. Perfect...
The Herfindahl-Hirschman Index (HHI) tells us a
____________ market structure would have the largest
measure.
Perfect competition
Oligopoly with many producers
Natural monopoly
Oligopoly with a few producers
13-The Herfindahl-Hirschman Index is a measure of market power that focuses on: * A) the ratio...
13-The Herfindahl-Hirschman Index is a measure of market power
that focuses on: *
A) the ratio of the price of a firm's product to the price
elasticity of demand for the product.
B) the share of the market controlled by the X largest firms
in the market.
C) the sum of the squares of the market share of each firm in
an industry.
D) the difference between a firm's product price and its
marginal costs of production.
14-Which of the...
Give two advantages of the Herfindahl index over the concentration ratio. Explain why you picked the...
Give two advantages of the Herfindahl index over the
concentration ratio. Explain why you picked the two items you
picked.
“Both the four-firm concentration ratio and the HHI can be affected by a merger between two...
“Both the four-firm concentration ratio and the HHI can be
affected by a merger between two firms that are not already in the
top four by size.” Is this statement true or false? Briefly explain
why.
Industry A has an HHI ratio of 4,400 while industry B has an HHI ratio of...
Industry A has an HHI ratio of 4,400 while industry B has an HHI
ratio of 800. Given this information, the Justice Department will
likely scrutinize a potential horizontal merger in ___________.
a. Industry B
b. Neither industry A nor B
c. Industry A.
d. Industry A and B
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