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Spreadsheet for Calculating Herfindahl-Hirshman Index (HHI)

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The problem gives this chart:

Competitor
Rank
Market A Market B Market C Market D
1 40 25 10 50
2 30 25 10 25
3 15 10 8 10
4 10 10 8 10
5 5 6 8 2
6 5 8 2
7 5 8 1
8 5 8
9 5 8
10 4 8
11 8
12 8
Totals 100 100 100 100

Calculate the pre-merger HHI measures for each market. How would a merger affect a market's HHI?

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Solution Preview

See the attached file for the calculations.

HHI is a measure of market concentration. You calculate HHI by summing the squares of the market shares. You can express the ...

Solution Summary

This solution explains the Herfindahl-Hirshman Index (HHI) and gives an Excel spreadsheet that can be used to calculate the HHI for any market, both before and after a merger.

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The Herfindahl-Hirshman Index

Industry A is composed of five large firms and 100 small firms. The market shares of the five largest firms are, respectively, 30, 25, 20, 15, and 10. The 100 small firms together have the remaining market share. Calculate the Herfindahl-Hirshman index and determine what degree of concentration it exhibits. Would it be considered an oligopoly?

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