What will be the value of Herfindahl–Hirschmann Index of market concentration for the following…
The Herfindahl–Hirschman Index is the sum of the squared market shares of all the firms in the industry: \( 30^2 + 25^2 + 15^2 + 15^2 + 10^2 + 5^2 = 900 + 625 + 225 + 225 +…
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What will be the value of Herfindahl–Hirschmann Index of market concentration for the following industry?
| Firm1 | Firm2 | Firm3 | Firm4 | Firm5 | Firm6 | |
|---|---|---|---|---|---|---|
| Industry share | 30 | 25 | 15 | 15 | 10 | 5 |
Answer and explanation
Correct answer C
The Herfindahl–Hirschman Index is the sum of the squared market shares of all the firms in the industry: . With shares written as fractions the same measure is 0.21, on a scale from 0 to 1. The figure 55 is merely the combined share of the two largest firms, a concentration ratio, not the HHI.
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UGC NET Economics