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    Calculating HHI index in the given cases

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    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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    https://brainmass.com/economics/principles-of-mathematical-economics/calculating-hhi-index-in-the-given-cases-468937

    Solution Preview

    a. What is the Herfindahl Index (HHI) for this industry?
    HHI Index=55^2+25^2+8^2+4^2+3^2+3^2+2^2=3752

    b. If there were a merger between Engines, Inc. and Silver Streak, what is the new industry Herfindahl Index?

    Little Toot Toys 55% Trains R Us 3%
    I Think I Can 25% Thomas Trains 3%
    Engines, Inc+Silver Streak=12% The Fastest Trains 2%

    HHI Index=55^2+25^2+12^2+3^2+3^2+2^2=3816

    c. ...

    Solution Summary

    Solution describes the steps to calculate HHI. It also studies if proposed mergers would be allowed by Justice Department.

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