Calculation of Change in HHI Associated with a Merger Consider a market that has three firms with the following market shares:
Firm A 15 percent
Firm B 25 percent
Firm C 60 percent
Suppose Firm B want to acquire Firm A so that the post-acquisition market would exhibit the following shares:
B + A = 40 percent
C = 60 percent
What is the change in the HHI resulting from the merger?

Question

Quizplus · Accepted Answer

The change in HHI is calculated by finding the difference in the sum of the squares of the market shares before and after the merger. Before the merger: HHI = 15^2 + 25^2 + 60^2 = 225 + 625 + 3600 = 4450. After the merger: HHI = 40^2 + 60^2 = 1600 + 3600 = 5200. Change in HHI = 5200 - 4450 = 750.