Market shares of all eight firms in an industry are 50 percent, 20 percent, 14 percent, 6 percent, 4 percent, 3 percent, 2 percent, and 1 percent. The Herfindahl index is _____.

Question

Market shares of all eight firms in an industry are 50 percent, 20 percent, 14 percent, 6 percent, 4 percent, 3 percent, 2 percent, and 1 percent. The Herfindahl index is _____.​

Quizplus · Accepted Answer

To calculate the Herfindahl index, we need to square the market shares of each firm and then add them up. 
(0.5)^2 + (0.2)^2 + (0.14)^2 + (0.06)^2 + (0.04)^2 + (0.03)^2 + (0.02)^2 + (0.01)^2 = 0.3162 
Therefore, the Herfindahl index is 3,162. The correct answer is (D).

Market Shares of All Eight Firms in an Industry Are