There are two major Internet service providers in Corinthia.One company has a market share of 60 percent,and the other firm has a market share of 40 percent.The Herfindahl-Hirschman Index for this industry is ________.

Question

Quizplus · Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by squaring the market share percentages of all firms in the industry and adding them together. 
HHI = (0.6)^2 + (0.4)^2
HHI = 0.36 + 0.16
HHI = 0.52
HHI = 5,200
An HHI value between 1,500 and 2,500 indicates moderate concentration, and an HHI value above 2,500 indicates high concentration. Since the calculated HHI value is 5,200, it indicates high concentration, which means the industry is highly concentrated and the competition may be limited.

There Are Two Major Internet Service Providers in Corinthia