Herfindahl-Hirschman index
Not what you're looking for?
Based only on the knowledge that the premerger market share of two firms proposing to merge was 20 percent each, an economist working for the justice department was able to determine that, if approved, the post merge HHI would increase by 800. How was the economist able to draw this conclusion without knowledge of the other firms' market shares? From this information can you devise a general rule explaining how the Herfindahl-Hirschman index is affected when exactly two firms in the market merge?
Purchase this Solution
Solution Summary
The expert examines Herfindahl-Hirschman index.
Solution Preview
The HHI is the sum of the squares of each company's market share. So if a company has a 20 percent market share, we would add 400 to the HHI and so forth. When two companies merge, the HHI increases because the square of a sum is more then the separate squares of each number.
We can see how the economist could ...
Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.