Herfindahl-Hirschman Index
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These top firms in industry A have market shares of 30, 25, 10 and 5% respectively. The top four firms in industry B have market shares of 15, 12, 8 and 4 % respectively.
To find the four firm concentration ratio, you will add the market shares of the four largest firms in each industry.
For Industry A:
30% + 25% + 10% + 5% =70%
For Industry B :
15% + 12% + 8% + 4% = 39%
Industry A is more concentrated because more of the total market share is found in the top four firms.
****Calculate the Herfindahl - Hirschman Index for each industry.*****
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