Suppose that an industry has a premerger Herfindahl-Hirschman Index (HHI) of 2,000, and two firms in that industry are trying to merge. The postmerger HHI is expected to be 2,300. This merger is likely to be approved.

Question

Quizplus · Accepted Answer

The increase in the HHI by 300 points, resulting in a post-merger HHI of 2,300, suggests a significant reduction in competition. Mergers resulting in an HHI over 2,500 or increases of 200 points or more in concentrated markets often face scrutiny or challenges from regulatory bodies like the FTC or DOJ in the United States.

Suppose That an Industry Has a Premerger Herfindahl-Hirschman Index (HHI)