Calculation of Change in the HHI Associated with a Merger The Justice Department has been asked to review a merger request for a market with the following four firms.
If Firm A acquires Firm D,what is the HHI for the new market?

Question

Quizplus · Accepted Answer

To calculate the HHI, we need to first find the market shares of each firm:

- Firm A: 50%
- Firm B: 20%
- Firm C: 20%
- Firm D: 10%

After the merger, Firm A will have 60% market share (50% + 10%), and the other firms will remain the same.

The HHI is calculated as the sum of the squared market shares, multiplied by 10,000:

HHI = (50^2 + 20^2 + 20^2 + 10^2) x 10,000 = 4,687,500

Therefore, the correct answer is D: 4,687.50