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Chapter 26: Q.15 (page 599)

In Problem 26-14, what is the value of the Herfindahl-Hirschman index?

Short Answer

Expert verified

the value of the Herfindahl-Hirschman index is1525

Step by step solution

01

Given Information

Herfindahl-Hirschman Index is a generally involved proportion of focus in an industry. It is estimated by squaring the market portion of each firm contending in the market and afterwards summarizing them.

02

Explanation

the bigger firm has a major share of 35%and the other three have a share of ten percent each.

Hence, Herfindahl-Hirschman index is

HHI=s12+s22+s32+.....sn2

role="math" localid="1653446888259" =352+3×102=1225+300=1525

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Most popular questions from this chapter

Take a look back at the data regarding the inkjet printer industry in Problem 26-2, and answer the following questions.

a. Suppose that consumer demands for inkjet printers, the prices of which are readily observable in office supply outlets and at Internet sites, are growing at a stable pace. Discuss whether circumstances are favorable to an effort by firms in this industry to form a cartel.

b. If the firms successfully establish a cartel, why will there naturally be pressures for the cartel to break down, either from within or from outside?

If there are 13 "All others" in the industry in Problem 26-1, each of which has a share of sales equal to 1 percent, what is the value of the Herfindahl-Hirschman Index for this industry?

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The table below shows recent worldwide market shares of producers of inkjet printers.

a. In this year, what was the four-firm concentration ratio in the inkjet-printer industry?

b. In this year, what was the seven-firm concentration ratio in the inkjet-printer industry?

Explain alternative methods of measuring industry concentration
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