Suppose a monopolistically competitive market has 10 firms.The largest firm has a 90 percent share of the market and the other nine firms each have 1 percent of the market.The Herfindahl-Hirschman Index for this industry is ________.

Question

Quizplus · Accepted Answer

The formula for calculating the Herfindahl-Hirschman Index (HHI) is as follows:
HHI = ∑ (Si)^2
where Si is the market share of each firm.
Using the formula, we can calculate the HHI for this market as follows:
HHI = (0.9)^2 + 9(0.01)^2
HHI = 0.81 + 0.0009
HHI = 0.8109
Therefore, the HHI for this market is 8,109.

Suppose a Monopolistically Competitive Market Has 10 Firms