Purchase Solution

The HHI

Not what you're looking for?

Ask Custom Question

See the attached files.

Attachments
Purchase this Solution
Solution Summary

The HHI is determined. Pricing and analysis/organizational architecture and institutional economics issues are addressed.

Solution Preview

Please find the attached solution.

Answers:

3)

The HHI is calculated by summing the squares of the individual market shares of all the participants. The spectrum of market concentration as measured by the HHI can be broadly characterized as unconcentrated (HHI below 1000), moderately concentrated (HHI between 1000 and 1800), and highly concentrated (HHI above 1800). The resulting regions provide a useful framework for merger analysis,.

Given, Firm 1 - 70% of market share
Firm 2 - 15% of market share
Firm 3 - 5% of market share

HHI before merger = 702 + 152 + 52 = 5150

Since the HHI is above the 1800, the market is highly concentrated.
As the combined market share, after the merger of firm 2 & 3 is 20%, then

HHI after merger = 702 + 202 = 5300
The difference in the HHI = 5300-5150 = 150.

According to the merger guidelines, if the Post-Merger HHI is above 1800, markets in this region are highly concentrated. A merger is presumed "likely to create or enhance market power or facilitate its exercise" if it produces an increase in the HHI of more than 100 points in a highly concentrated market. i.e if the merger increases the HHI by less than 200 in a highly concentrated market, it is not considered anti-competitive and is generally approved . While, mergers in which the HHI increases by more than 200 points in a highly concentrated market ...

Purchase this Solution
Free BrainMass Quizzes
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.

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.

View More Free Quizzes
Related BrainMass Solutions

  • Herfindahl indices

    If there are three equal competitors, the HHI is over 3,300, with high market power. Going from three to two jumps the HHI up sharply, to 5,000.

  • Spreadsheet for Calculating Herfindahl-Hirshman Index (HHI)

    How would a merger affect a market's HHI? 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.

  • Calculation Using the Herfindahl-Hirschman Index

    Therefore, the market shares would look as follows after the buyout: A 25 B 25 C 25 D 10 E 10 The HHI corresponding to this situation is: HHI = 25^2 + 25^2 + 25^2 + 10^2 + 10^2 = 2,075.

  • Calculating HHI and Concentration Ratio

    Calculate the Herfindahl-Hirschman index (HHI).

  • Horizontal Integration

    Where the post-merger HHI exceeds 1800, it will be presumed that mergers producing an increase in the HHI of more than 100 points are likely to create or enhance market power or facilitate its exercise.

  • Calculating HHI index and C4 Ratio

    Calculate the Herfindahl-Hirschman index (HHI) after the merger. Show your work. HHI Index=6.97^2+34.84^2+27.87^2+20.91^2+9.41^2=2564.92 HHI index is above 1800, industry is concentrated. e. Do you think the U.S.

  • Calculating HHI index in the given cases

    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?

  • Calculating HHI in an Unconcentrated Market

    Instruction: Round to the nearest penny (two decimal places). Calculate the premerger Herfindahl-Hirschman index (HHI) for this market. b. Suppose that any two of these firms merge. What is the postmerger HHI? c.

  • HHI Index

    460284 HHI Index 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.

  • Economics: Herfindahl-Herschman Index (HHI)

    The Antitrust Division uses the Herfindahl-Herschman Index (HHI) to measure the concentration of a market before and after a merger. The HHI is calculated by adding the squares of each firm's market share.

View More Related Solutions