Dorchester County has the following five banks in its market area:
$\begin{array} { l c }
\text { Bank } & \text { Total Assets } \
\text { First National Bank, NA } & \$ 1,500 \text { million } \
\text { Dorehester County Bank } & \$ 750 \text { million } \
\text { First State Bank } & \$ 500 \text { million } \
\text { Summerfield Bank } & \$ 250 \text { million } \
\text { Charlestown Bank } & \$ 250 \text { million } \
\text { All Banks } & \$ 3,250 \text { million }
\end{array}$
-What is the Herfindahl-Hirschman Index for this market area?

Question

Dorchester County has the following five banks in its market area:
$\begin{array} { l c } 
\text { Bank } & \text { Total Assets } \
\text { First National Bank, NA } & \$ 1,500 \text { million } \
\text { Dorehester County Bank } & \$ 750 \text { million } \
\text { First State Bank } & \$ 500 \text { million } \
\text { Summerfield Bank } & \$ 250 \text { million } \
\text { Charlestown Bank } & \$ 250 \text { million } \
\text { All Banks } & \$ 3,250 \text { million }
\end{array}$
-What is the Herfindahl-Hirschman Index for this market area?

Quizplus · Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by squaring the market share of each firm in the market and then summing the resulting numbers. The market shares are: First National Bank (46.15%), Dorchester County Bank (23.08%), First State Bank (15.38%), Summerfield Bank (7.69%), and Charlestown Bank (7.69%). The HHI is $ (46.15^2) + (23.08^2) + (15.38^2) + (7.69^2) + (7.69^2) = 3,017 $.

Dorchester County Has the Following Five Banks in Its Market