Calculating HHI in an Unconcentrated Market
Not what you're looking for?
You are the manager in a market composed of 12 firms, each of which has a 8.33 percent market share. In addition, each firm has a strong financial position and is located within a 100-mile radius of its competitors.
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. Based only on the information contained in this question and on the U.S. Department of Justice Horizontal Merger Guidelines described in this chapter, do you think the Justice Department would attempt to block a merger between any two of the firms?
a. It likely will not.
b. It may but will also consider other factors.
c. It likely will.
Purchase this Solution
Solution Summary
The solution answers the question on how to calculate the HHI and evaluates a situation where the market is "unconcentrated". Clear formulas and step by step guidance is provided as well.
Solution Preview
a. HHI = 12 * 8.33^2 = 832.66
b. If two firms merge, you will have 10 firms with a 8.33 market share and 1 firm with a 16.66 market share
HHI = 10* 8.33^2 + 16.66^2 = 971.44
c.
According to the DOJ-FTC 2010 ...
Purchase this Solution
Free BrainMass Quizzes
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.