Question

Consider an industry that is made up of nine firms each with a market share (percent of sales) as follows:

a. firm

a.30%

b. firm

b.20%

c. firms c, d and

e.10% each

d. firms f, g, h and j: 5% each what is the value of the herfindahl-hirschman index?

Answer 1

This is supposed to measure the market share concentration of industries all in the same area. I take it a low HHI is not very concentrated and a large number (10000) means that the market share is very concentrated. The answer I get is about 1700 which means there is not much concentration.

Firm % % squared

a 30 900

b 20 400

c 10 100

d 10 100

e 10 100

f 5 25

g 5 25

h 5 25

j 5 25

Total 100% 1700

So to get an idea how concentrated everything is, you square the % s and add them up. I don't think the there is a monopoly in this industry. It is pretty evenly spread out.