Consider an industry that is made up of nine firms each with a market share (percent of sales) as follows:
a. Firm A: 30%
b. Firm B: 20%
c. Firms C, D, and E: 10% each
d. Firms F, G, H, and J: 5% each
What is the value of the Herfindahl-Hirschman Index?

Question

Consider an industry that is made up of nine firms each with a market share (percent of sales) as follows: 
a. Firm A: 30%
b. Firm B: 20%
c. Firms C, D, and E: 10% each
d. Firms F, G, H, and J: 5% each
What is the value of the Herfindahl-Hirschman Index?

Quizplus · Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by squaring the market share of each firm and then summing the results: (30^2) + (20^2) + (10^2)*3 + (5^2)*4 = 900 + 400 + 300 + 100 = 1,700.

Consider an Industry That Is Made Up of Nine Firms