Market shares of all eight firms in an industry are 50 percent,20 percent,14 percent,6 percent,4 percent,3 percent,2 percent,and 1 percent.The Herfindahl-Hirschman Index (HHI)is _____

Question

Quizplus · Accepted Answer

To calculate the HHI, we need to square the market shares of each firm and then sum them up. 
(0.5)^2 + (0.2)^2 + (0.14)^2 + (0.06)^2 + (0.04)^2 + (0.03)^2 + (0.02)^2 + (0.01)^2 = 0.25 + 0.04 + 0.0196 + 0.0036 + 0.0016 + 0.0009 + 0.0004 + 0.0001 = 0.3216 
Therefore, the HHI is 3,162, which is the only option listed.

Market Shares of All Eight Firms in an Industry Are