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# HHI Index

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Determine whether the Justice Department would challenge a merger between two firms in an industry with 10 equalized firms, based on the Herfindhal index guidelines. (No other factor considered)

https://brainmass.com/economics/microeconomics/hhi-index-460284

#### Solution Preview

Percent share of each firm before merger=100%/10=10%
HHI Index=10^2+10^2+10^2+10^2+10^2+10^2+10^2+10^2++10^2+10^2=1000
HHI Index ...

#### Solution Summary

Solution determines whether the proposed merger in the given case is likely to be challenged.

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## Herfindahl Index (HHI)

Suppose the market for toy trains is comprised of the following seven competitors with the indicated market shares:
Little Toot Toys 55% Trains R Us 3%
I Think I Can 25% Thomas Trains 3%
Engines, Inc. 8% The Fastest Trains 2%
Silver Streak 4%

a. What is the Herfindahl Index (HHI) for this industry?
b. If there were a merger between Engines, Inc. and Silver Streak, what is the new industry Herfindahl Index?
c. Would the Justice Department allow such a merger?
d. Why or why not?
e. If there were a merger between I Think I Can and Engines, Inc., what is the new industry Herfindahl Index?
f. Would the Justice Department allow such a merger?
g. Why or why not?
h. If there were a merger between Silver Streak, Trains R Us, Thomas Trains and The Fastest Trains, what is the new industry Herfindahl Index?
i. Would the Justice Department allow such a merger?
j. Why or why not?

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