Suppose the banking market in Cedar Rapids consists of banks that have the following shares of the market: 24 percent, 18 percent, 17 percent, 14 percent, 9 percent, 8 percent, 4 percent, 3 percent, 2 percent, 1 percent.Calculate the HHI.

Question

Quizplus · Accepted Answer

HHI (Herfindahl-Hirschman Index) is calculated by summing the squares of individual market shares. 
HHI = 24^2 + 18^2 + 17^2 + 14^2 + 9^2 + 8^2 + 4^2 + 3^2 + 2^2 + 1^2 = 1,560. 
The higher the HHI score, the more concentrated the market. The Department of Justice considers markets with an HHI above 2,500 to be highly concentrated. Therefore, a score of 1,560 indicates that the market is relatively unconcentrated.

Suppose the Banking Market in Cedar Rapids Consists of Banks