3. The Herfindahl index Suppose that three firms make up the entire tire manufacturing industry. One has a 60% market share, and the other two have a 20% market share each. The Herfindahl index of this industry is . A new firm, Tread Tough, enters the tire manufacturing industry and immediately captures a 20% share of the market. This would cause the Herfindahl index for the industry to . The largest possible value of the Herfindahl index is 10,000 because: An index of 10,000 corresponds to 100 firms with a 1% market share each An industry with an index higher than 10,000 is automatically regulated by the Justice Department An index of 10,000 corresponds to a monopoly firm with 100% market share