A market served by just two banks,equal to each other in size,would have an HHI of 5,000.

Question

Quizplus · Accepted Answer

According to the Herfindahl-Hirschman Index (HHI), the HHI is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. In a market served by just two banks, each with an equal market share, the HHI would be [(0.5)^2 + (0.5)^2] x 10,000 = 5,000. Therefore, the statement is true.

A Market Served by Just Two Banks,equal to Each Other