13 Suppose a banking market consists of banks that have the following shares of the market:

34 percent, 16 percent, 13 percent, 10 percent, 9 percent, 8 percent, 4 percent, 4 percent, and 2 percent.

a Calculate the HHI. Show your work.

b Suppose the largest bank wants to merge with the smallest bank. Calculate the new HHI

(after the merger). Show your work.

c Would such a merger be acceptable, according to standard Justice Department guidelines?

Explain why or why not.

Analytical Problems