21-147 If Bank 1 is acquired by Bank 3,what is the impact on the market's HHI?

Question

Quizplus · Accepted Answer

To calculate the impact on the market's HHI, we need to first calculate the HHI before the acquisition and then after the acquisition. Before the acquisition, the HHI is 10,000 (2000^2 + 4000^2 + 4000^2). After the acquisition, Bank 1 and Bank 3 will have a combined market share of 6000, so the new HHI will be 19,063 (4000^2 + 6000^2 + 6000^2). Therefore, the increase in the HHI is 9,063, which is closest to choice C (1563).

21-147 If Bank 1 Is Acquired by Bank 3,what Is