Question

What is the example of calculating HHI?

1) 1 firm, 100
2) 2 Firms, each 50
3) 4 firms, with market shares of 30
4) 10 firms, each with a 10

Answer 1

To calculate the HHI, you square the market shares of each firm and sum them up. Examples include a monopoly with 100% market share (HHI = 10,000) and a duopoly with firms each having 50% market share (HHI = 5,000).

Step-by-step explanation:

To calculate the Herfindahl-Hirschman Index (HHI), you need to square the market shares of each firm and sum them up. Here are examples of calculating HHI:

1. In a monopoly with 1 firm having 100% market share, the HHI is 100² = 10,000.
2. In a duopoly with 2 firms, each having 50% market share, the HHI is 50² + 50² = 5,000.
3. In a market with 4 firms, having market shares of 30%, the HHI is 30² + 30² + 30² + 30² = 3,600.
4. In a market with 10 firms, each having 10% market share, the HHI is 10² + 10² + ... + 10² = 1,000.