There is an industry with 5 firms. There is one large firm with 80% market share,...

There is an industry with 5 firms. There is one large firm with 80% market share, three medium-sized firms with 6% market share, and one small firm with 2% market share. Calculate the Herfindahl-Hirschman Index (HHI) for this industry. Please show your work.

Is this industry either highly concentrated, moderately concentrated, or not concentrated?

There is an industry with 5 firms. There is one large firm with 80% market share, three medium-sized firms with 6% market share, and one small firm with 2% market share. Say the large firm merged with one of the medium-sized firms. By how much would this increase the industry's HHI? Please show your work.

According to the guidelines presented in class, should the FTC either approve the merger, investigate the merger further, or challenge the merger?

Solutions

Expert Solution

Herfindahl Hirschman Index = 80^2 + 6^2 + 6^2 + 6^2 + 2^2 = 6,400 + 36 + 36 + 36 + 4 = 6,512

Since, HHI is less than 8000 and greater than 4000, it is moderately concentrated industry.

Now new Maket share after merger = Large firm 86%, two medium firm 6%, one small firm 2%

New HHI = 86^2 + 6^2 + 6^2 + 2^2 = 7472

Increase in HHI = 7472 - 6512 = 960

jeff jeffy answered 2 years ago

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