You are the manager in a market composed of 22 firms, each of which has a 4.54 p

Question

You are the manager in a market composed of 22 firms, each of which has a 4.54 percent market share. In addition, each firm has a strong financial position and is located within a 100-mile radius of its competitors.

Instruction: Round your answers to the nearest penny (two decimal places).

a. Calculate the premerger Herfindahl-Hirschman index (HHI) for this market.




b. Suppose that any two of these firms merge. What is the postmerger HHI?




c. Based only on the information contained in this question and on the U.S. Department of Justice Horizontal Merger Guidelines described in this chapter, do you think the Justice Department would attempt to block a merger between any two of the firms?

Explanation / Answer

HHH = Total ( % share*100)^2

Premerger HHI =22 (4.54)^2 = 453.45

NOte AS PRemerger HHI is less than 1000 its is not a comptetive industry and any merger will not result in anti trust action ( therefore ans of third part is : It is not likely)

Post merger HHI = 20 (4.54)^2 +1(9.08)^2

= 412.23 + 82.44

=494.676

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.