The Herfindahl-Hirschman Index (HHI), a commonly accepted measure of market concentration. If the value of the HHI is less than 1,000, the Justice Department considers an industry as competitive, or unconcentrated. An index between 1,500 and 2,500 is considered representative of a moderately concentrated industry, and an index greater than 2,500 is representative of a highly concentrated industry. If a transaction increases the HHI by more than 200 points in highly concentrated markets, the Justice Department is likely to take antitrust actions. Suppose that in the market for sunglasses, market share is divided among six companies in the following manner: Firm Sun Shades Cool Shades UV Shield Shady Eyewear Tinted Windows Sun Fashion Market Share 60% 15% 10% 8% 5% 2% Before the merger, the value of the Herfindahl index is market for sunglasses is which means that the . And after the merger, the HHI is Based on the Herfindahl index of the market for sunglasses, the FTC should merger between Cool Shades and Sun Fashion.
The Herfindahl-Hirschman Index (HHI), a commonly accepted measure of market concentration. If the value of the HHI is less than 1,000, the Justice Department considers an industry as competitive, or unconcentrated. An index between 1,500 and 2,500 is considered representative of a moderately concentrated industry, and an index greater than 2,500 is representative of a highly concentrated industry. If a transaction increases the HHI by more than 200 points in highly concentrated markets, the Justice Department is likely to take antitrust actions. Suppose that in the market for sunglasses, market share is divided among six companies in the following manner: Firm Sun Shades Cool Shades UV Shield Shady Eyewear Tinted Windows Sun Fashion Market Share 60% 15% 10% 8% 5% 2% Before the merger, the value of the Herfindahl index is market for sunglasses is which means that the . And after the merger, the HHI is Based on the Herfindahl index of the market for sunglasses, the FTC should merger between Cool Shades and Sun Fashion.
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.9P
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Blank one:
a. highly concentrated
b. moderately concentrated
c. competitive
Blank two:
a. not challenge
b. challenge
c. encourage
Transcribed Image Text:The Herfindahl-Hirschman Index (HHI), a commonly accepted measure of market
concentration. If the value of the HHI is less than 1,000, the Justice Department considers
an industry as competitive, or unconcentrated. An index between 1,500 and 2,500 is
considered representative of a moderately concentrated industry, and an index greater
than 2,500 is representative of a highly concentrated industry. If a transaction increases
the HHI by more than 200 points in highly concentrated markets, the Justice Department
is likely to take antitrust actions.
Suppose that in the market for sunglasses, market share is divided among six companies in the
following manner:
Firm
Sun Shades
Cool Shades
UV Shield
Shady Eyewear
Tinted Windows
Sun Fashion
Market Share
60%
15%
10%
8%
5%
2%
Before the merger, the value of the Herfindahl index is
market for sunglasses is
which means that the
And after the merger, the HHI is
Based on the Herfindahl index of the market for sunglasses, the FTC should
merger between Cool Shades and Sun Fashion.
a
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