If the snowboard industry is dominated by four large firms, each with 20% market share, and two small firms, each with 10% market share, what is the four-firm concentration ratio and what is the Herfindahl-Hirschman Index (HHI)?

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Quizplus · Accepted Answer

The four-firm concentration ratio is the sum of the market shares of the four largest firms, which is 20% + 20% + 20% + 20% = 80%. The Herfindahl-Hirschman Index (HHI) is calculated by squaring the market share of each firm and then summing these squares. For this industry, HHI = (20^2 + 20^2 + 20^2 + 20^2 + 10^2 + 10^2) = 400 + 400 + 400 + 400 + 100 + 100 = 1,800.

If the Snowboard Industry Is Dominated by Four Large Firms