Which of the following is most likely to increase the Herfindahl index of a particular industry?
A) A horizontal merger between two of the industry's largest firms.
B) A vertical merger between one of an industry's largest firms and one of the many input suppliers in the resource market.
C) A conglomerate merger involving one of the industry's major firms.
D) An agreement by all the industry firms to divide up the market among them.

Question

Quizplus · Accepted Answer

A horizontal merger between two of the industry's largest firms would lead to a reduction in the number of firms operating in the industry and an increase in market concentration, thereby increasing the Herfindahl index. A vertical merger (B) or conglomerate merger (C) may not necessarily lead to increased market concentration in the industry, and D is not a viable option.

Which of the Following Is Most Likely to Increase the Herfindahl