Consider an industry that is made up of six firms with the following market shares: Firm A - 50%, Firm B - 20%, Firms C and D - 10% each, and Firms E and F - 5% each.What is the value of the Herfindahl-Hirschman Index?
A)2,500
B)3,150
C)8,100
D)10,000

Question

Quizplus · Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by summing the squares of the market shares of all firms in the industry. HHI = 50^2 + 20^2 + 10^2 + 10^2 + 5^2 + 5^2 = 2500 + 400 + 100 + 100 + 25 + 25 = 3,150.

Consider an Industry That Is Made Up of Six Firms