1. How does the Department of Justice use the HHI to allow or block mergers? Additionally,...

1. How does the Department of Justice use the HHI to allow or block mergers? Additionally, please list the types of mergers. This is a microecon final essay question.

Expert Solution

The US Justice Department uses the HHI to evaluate potential epoch issues. Regulators use the HHI Index, using the largest 50 companies from a specific industry. Should essential business be monopolized? or should it be considered competitive? Decides that.

The U.S. Justice Department divides the market into various Catagory. The market with HHI over 2500… is considered a highly concentrated market. The market with a HHI of 1500 to 2500 is considered a moderately concentrated market. The US Justice Department also estimates a market with less than 1500 HHl. In general highly centralized markets, HHI's over 200… mergers raise anti-trust concerns. This is because they are expected to increase market strength under the Federal Trade Commission and the Department of Horizontal Directive Guidelines jointly issued by the Department.

There are 5 different types of mergers
*Product extension merger
*Vertical merger
*Market extension merger
*Conglomerate merger
*Horizontal merger

Rahul Sunny answered 2 years ago

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