There are twenty five dealers in the local market for new cars. The largest dealership has a market share of 12 percent; the second and third largest have 10 percent and 9 percent, respectively; the fourth and fifth largest have 5 percent and 4 percent, respectively; and the remaining twenty dealerships each have a 2 percent market share. What is value of the Herfindahl-Hirschman index (HHI) for this market?

Question

Quizplus · Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by summing the squares of the market shares of all firms in the market. For this market: HHI = 12^2 + 10^2 + 9^2 + 5^2 + 4^2 + 20*(2^2) = 144 + 100 + 81 + 25 + 16 + 80 = 446.

There Are Twenty Five Dealers in the Local Market for New