Herfindahl Index for Market Concentration
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For this problem use the Herfindahl Index to compute market concentration:
Suppose Apple has 45% of the U.S. market share for smartphones, followed by Samsung with 30%, LG with 9%, Motorola with 8%, HTC with 6%, and Nokia with 2%. What is the Herfindahl Index for the smartphone industry based on these numbers? Based on the Herfindahl Index, do you think the government would be willing to approve a merger between Apple and Samsung?
Now suppose Nokia and Motorola come out with a new smartphone that takes away a huge chunk of market share from Apple and Samsung. The new market shares are 25% for Apple, 20% for Samsung, 20% for Motorola, 20% for Nokia, 10% for LG, and 5% for HTC
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The response provides you a structured explanation of Herfindahl Index. It also gives you the relevant references
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The Herfindahl Index is calculated by taking the market share of each firm in the industry, squaring them, and summing the result.
In the first example where Apple has 45% of the U.S. market share for smartphones, followed by Samsung with 30%, LG with 9%, Motorola with 8%, HTC with 6%, and Nokia with 2%. By squaring each number and summing we ...
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- BSc , University of Calcutta
- MBA, Eastern Institute for Integrated Learning in Management
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