.A measure called Herfindahl-Hirschman Index is used to measure the degree of competition in an industry. The HHI is the square of each firm’s market share summed over the firms in the industry. (Where a market share is the percentage of sales in the market accounted for by that firm). For example, if an industry contains only three firms and their market shares are 60%, 25%, and 15% then the HHI (by squaring each firm’s share and summing them) is 4450. Some economists classify the market structures according to HHI scores. An HHI below 1,500 indicates a strongly competitive market, between 1,500 and 2,500 indicates a somewhat competitive market, and over 2,500 indicates an oligopoly.
Given the information in the table, calculate the HHI in this industry. If yahoo and Bing were to merge, what would the HHI be?
Google 67%
Yahoo 18
Bing 11
Ask 3
AOL 1
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
