There are three banks in East Panhandle.First State Bank which currently has 25 percent of the deposits in the area,Second State Bank which currently has 40 percent of the deposits,and Third State Bank which has the rest.What is the Herfindahl-Hirschman Index for East Panhandle (compute the share of Third State Bank first)?

Question

Quizplus · Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by squaring the market share of each firm and then summing the results. Third State Bank has 35% of the deposits (100% - 25% - 40%). The HHI is (25^2) + (40^2) + (35^2) = 625 + 1600 + 1225 = 3450.

There Are Three Banks in East Panhandle