In 2010 Company A announced its intention to buy Company B, and Company C announ
ID: 2494891 • Letter: I
Question
In 2010 Company A announced its intention to buy Company B, and Company C announced its goal of buying Company D. The table below shows the market shares held by the largest five firms in 2010. The remaining 15% of the market was made up by 15 firms, each with a market share of 1%.
Market share %
Company C
39
Company A
28
Company D
7
Company B
6
Company E
5
Remaining 15 firms
1% each
Calculate the H index for the industry as it was structured in 2010.
Calculate postmerger H index if only Company C had purchased Company B.
Calculate postmerger H index if only Company A had purchased Company D.
Market share %
Company C
39
Company A
28
Company D
7
Company B
6
Company E
5
Remaining 15 firms
1% each
Explanation / Answer
1. HHI = 392 + 282 + 72 + 62 + 52 + (12 * 15) = 1521 + 784 + 49 + 36 + 25 + 15 = 2430
2. HHI = (39 + 6)2 + 282 + 72 + 52 + (12 * 15) = 2025 + 784 + 49 + 25 + 15 = 2898
3. HHI = 392 + (28 + 7)2 + 62 + 52 + (12 * 15) = 1521 + 1225 + 36 + 25 + 15 = 2822
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