Assume six firms composing an industry have market shares of 35, 25, 15, 10, 10, and 5 percent. The Herfindahl index for this industry is

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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 this industry, the calculation would be: $35^2 + 25^2 + 15^2 + 10^2 + 10^2 + 5^2 = 1225 + 625 + 225 + 100 + 100 + 25 = 2300$.

Assume Six Firms Composing an Industry Have Market Shares of 35