The use of the Herfindahl-Hirschman Index (HHI) to measure bank concentration has been criticized because
A)ascertaining whether the relevant geographic scope of the market should be regional, national, or city is becoming increasingly difficult to determine.
B)the index was originally designed for nonfinancial competition.
C)separating financial markets into banks, thrifts, and insurance companies is becoming increasingly difficult to justify.
D)All of the options.
E)ascertaining whether the relevant geographic scope of the market should be regional, national, or city is becoming increasingly difficult to determine and separating financial markets into banks, thrifts, and insurance companies is becoming increasingly difficult to justify.

Question

Quizplus · Accepted Answer

All of the options listed are valid reasons for the criticism of using the Herfindahl-Hirschman Index (HHI) to measure bank concentration. It is becoming increasingly difficult to determine the appropriate geographic scope of the market, the index was originally designed for nonfinancial industries, and separating financial markets into different categories is becoming more challenging. Therefore, all of these factors contribute to the criticism of using the HHI to measure bank concentration.

The Use of the Herfindahl-Hirschman Index (HHI) to Measure Bank