ECO 202-F01 Microeconomics Spessard SU18 Jade Jessop 6/20/18 2:32 PM Homework: F

Question

ECO 202-F01 Microeconomics Spessard SU18 Jade Jessop 6/20/18 2:32 PM Homework: Final Exam Extra Credit Score: 0 of 1 pt Concept: Merger Standards 1 Save 11 of 15 (13 complete) HW Score: 84%, 126 of 15 pts E Question Help Consider a market with our firms. Suppose the first firm has a 44% market share, the second firm has a 35% market share, the third firm has a 20% market share, and the fourth firm has a 1% market share. Using the Herfindahl-Hirschman Index (HHI), what is this market's level of concentration? 3562 (Enter a numeric response using an integer) Now suppose the third and fourth firms propose to merge. Were they to merge, then the market's HHl would increase to spired t manus alvador t recen tarring n Hanks you're lfie, a pr

Explanation / Answer

The Herfindahl-Hirschman index (HHI) is a measure of market concentration. It is calculated by squaring the market share of each firm competing in a market and then summing the resulting numbers.
So, here HHI = (44)2 + (35)2 + (20)2 +(1)2 = 1936 + 1225 + 400 + 1 = 3562

When the third and fourth firms merge, HHI = 44)2 + (35)2 + (21)2 = 3602

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