Question
Nationwide Bank has approached Hometown Bank with a proposal to merge. The following table lists the sales of the banks in the area. Use this
Nationwide Bank has approached Hometown Bank with a proposal to merge. The following table lists the sales of the banks in the area. Use this information to calculate the four-firm concentration ratio (C4) and the Herfindahl- Hirschman index (HHI). Based on the Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice (DOJ) Horizontal Merger Guidelines described in pages 249 250 of Baye M.R. (2010), do you think the Justice Department is likely to challenge the proposed merger. (Note: Use the formula; HHI =10,000 to compute the HHI).
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