What is the Herfindahl index of an industry made up of four equal-sized firms?

Question

Quizplus · Accepted Answer

The Herfindahl index is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. For four equal-sized firms, each would have a market share of 25%. Squaring this (0.25^2) gives 0.0625. Summing this result for all four firms (0.0625 * 4) gives 0.25, or 2,500 when expressed as an index (multiplying by 10,000 to avoid decimals).

What Is the Herfindahl Index of an Industry Made Up