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5 April, 05:35

N industry consists of three firms with sales of $360,000, $650,000, and $265,000.

a. calculate the herfindahl-hirschman index (hhi)

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  1. 5 April, 06:45
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    These three together form total market, so here we have to add up everything to know volume of the market

    A+B+C = 1,275,000 is the total market

    Then we have to calculate individual market share

    which would eb 1) 28.2%, 2) 50.9%, 3) 20.8%

    This can be calcualated by simple percetage calculation. (1275000-360000/1275000*100) - 100 will give what share each has.

    Then we apply HHI formula

    HHI = s1^2 + s2^2 + s3^2 + ... + sn^2

    HHi is nothing but squaring of each of the percentages and adding them up

    (28.2) 2 + (50.9) 2 + (20.8) 2

    812+2590+432 = 3834

    HHI of 3834 shows it is highly competitve market.
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