An industry with only three large equally-sized firms would have the same four firm concentration ratio but a higher Herfindahl-Hirshman Index compared to an industry with only four equally sized firms.

Question

Quizplus · Accepted Answer

The Herfindahl-Hirshman Index (HHI) is calculated by summing the squares of the market shares of all firms in the industry. With three equally-sized firms, the HHI is higher than with four equally-sized firms because squaring larger market shares results in a higher sum. The four-firm concentration ratio would be the same as it considers only the top four firms, which in both cases would account for 100% of the market.

An Industry with Only Three Large Equally-Sized Firms Would Have