If an industry consists of only four firms with equal market shares,then the Herfindahl-Hirschman Index (HHI)is _____

Question

Quizplus · Accepted Answer

The Herfindahl-Hirschman Index (HHI) is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. If there are four firms with equal market shares, each would have a 25% (or 0.25) share of the market. Squaring this (0.25^2) gives 0.0625. Summing this result for all four firms (0.0625 * 4) gives an HHI of 0.25, or when expressed as a whole number (which is the common practice for HHI), it's 2500.

If an Industry Consists of Only Four Firms with Equal