Suppose there are three firms in a market.The largest firm has sales of $50 million,and each of the other two firms has sales of $25 million.The Herfindahl-Hirschman Index of this industry is

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The Herfindahl-Hirschman Index (HHI) is calculated by squaring the market share of each firm and then summing the results. The largest firm has a market share of 50%, and each of the other two firms has a market share of 25%. Thus, HHI = (50^2) + (25^2) + (25^2) = 2500 + 625 + 625 = 3750.

Suppose There Are Three Firms in a Market