When small firms in a concentrated industry merge, it will increase the Herfindahl-Hirshman Index but not change the four firm concentration ratio.

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When small firms in a concentrated industry merge, it will increase the Herfindahl-Hirshman Index because the merger reduces the number of firms in the industry, which increases the market share of the remaining firms. However, the four-firm concentration ratio will not change because the merger does not affect the market share of the four largest firms in the industry.

When Small Firms in a Concentrated Industry Merge, It Will