Question
Suppose you know only the market shares for the top four firms in a market: 20.1 %, 19.1 %, 17.9 %, and 15.4 %. Determine
Suppose you know only the market shares for the top four firms in a market: 20.1%, 19.1%, 17.9%, and 15.4%. Determine the minimum and maximum HerfindahlHirschman indices for this market. (a) Minimum HerfindahlHirschman Index (HHI): (Calculated using standard HHI formula) (b) Maximum HerfindahlHirschman Index (HHI):
(the HHI of the top 4 firms will give you the minimum HHI, where the min HHI reflects the least concentrated the market can be given the market shares listed. When finding the min HHI, it is assumed that there are an infinite number of firms outside the top 4, each with the market share close to 0)
(If the minimum HHI meant that the there are an infinite remaining firms, and the market shares of the firms are each close to 0, there are 2 things to keep in mind: How many firms would there need to be outside the top 4, and What would each of their market shares need to be, for the HHI to be at its maximum?) (the answer is not 10,000)
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