The following three FIs dominate a local market and their total assets are given below. What is the Herfindahl-Hirschman Index (HHI) for the local market?

Question

The following three FIs dominate a local market and their total assets are given below.  What is the Herfindahl-Hirschman Index (HHI) for the local market?

Quizplus · Accepted Answer

To calculate HHI, we need to square the market share of each FI and then sum those values.
- FI1 market share = (400/2,000) = 0.2
- FI2 market share = (1,200/2,000) = 0.6
- FI3 market share = (400/2,000) = 0.2

HHI = (0.2^2 + 0.6^2 + 0.2^2) * 10,000 = 3,550.

Therefore, the answer is C.

The Following Three FIs Dominate a Local Market and Their