You are the manager in a market composed of 3 firms, each of which has a 33.33 p

Question

You are the manager in a market composed of 3 firms, each of which has a 33.33 percent market share. in addition, each firm has a strong financial position end Is located within a 100-mUe radius of Its competitors. Instruction: Round your answers to the nearest penny (two decimal places). a. Calculate the premerger Herfindahl-Hirschman Index (HHI) for this market b. Suppose that any two of these firms merge. What is the postmerger HHI? c. Based only on the Information contained hi this question and on the US. Department of Justice Horizontal Merger Guidelines described hi this chapter do you think the Justice Department would attempt to block a merger between any two of the firms? it may but will also consider other factors. It likely will not. It likely will.

Explanation / Answer

a) H-Index = (33.3) 2+ (33.3)2 + (33.3)2

=1108.89+1108.89+1108.89

=3326.67

b) H-Index = (33.3) 2+ (66.9)2

=1108.89 +4475.61

=5,583.61

c)   HHI between 1,500 and 2,500 to be regarded as moderately concentrated, and justice department considers merger in which the H-index is more than the 2,500 points.

Hence correct asswer is " it likely will"

  

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