Download the App!
Get 24/7 study help with the Numerade app for iOS and Android! Enter your email for an invite.
Get the answer to your homework problem.
Try Numerade free for 7 days
Like
Report
How do we measure a Herfindahl-Hirshman Index? What does a low measure mean about the extent ofcompetition?
Antitrust laws are the laws and regulations that are imposed by government or authorities toensure the increased competitiveness in the market. It also helps observe and control mergersand acquisition taking place between big or key firms.Herfindan-Hirschman index HHI is one of the measures of market share of dominant firms in anindustry. HHI is calculated by squaring the market share of top firms and then adding themtogether. So, if there is only one firm with hundred percent market share then highest HHI valuepossible is $10,000$ . So, higher the value of HHl, lower is the level of competitiveness in theindustry.
No Related Courses
Chapter 11
Monopoly and Antitrust Policy
Markets and Welfare
The Economics of the Public Sector
Firm Behavior and the Organization of Industry
Topics for Further Study
02:10
How do we measure a four-f…
01:30
Why can it be difficult to…
01:40
A single firm in a perfect…
00:36
Does either the four-firm …
01:00
What is the index of lead…
00:58
Short Answer Explain how c…
01:09
What determines the level …
01:25
00:53
Which price index does the…
01:04
How does an STM measure th…
00:51
What does a z-score measur…
00:57
Define percentile rank.
00:19
What does the height of a …
02:05
What is an index fund?
Which measure of central t…
02:01
What does net area measure…
02:19
How is the poverty rate ca…
01:16
How does competition, whet…
07:19
How does monopolistic comp…
01:46
Explain how measures of ce…
have you done today? We're solving problem number 40 which asks us, um, about the h h i, which is the her friend. All Hershman Index. Um, it asks us, apologized by Miss Pronounce that name. Um, but essentially, it asks us to, uh, show how you measure this index. And then what does a low number on the index indicate about the competition in the market? So the generic formula for the perfect doll Hershman index again, I'm sorry. From mispronouncing back, um is it's going to be adding the squares of the market shares of each firm in the industry. So what that looks like is I would have a share, like we'll call That s one one of the market shares Lineup square that when I be adding a second chair in the same industry again swear that at 1/3 1 and so on and so forth members wearing each number so generically, what I can do is I can just say it's plus seven, so whatever that shared number is in the market for that particular industry and square. So that's basically how you calculate it. Remember, it's adding this square off the market shares of each burn, and then what does a low number? So if I have a low number on the index in terms of competition, it means it's gonna be closer. Not actually to Monopoly, which have zero competition. As you might think, it's actually closer competition with Manning any firms all competing. So what we can say is the lower the number on the perfect doll Hershman again and really sorry from this renouncing that. But the closer the number on the H H I indexes to zero um, weaken just generalize when its lower there's gonna be higher competition. And I think that's right, that it would be closer to perfect competition. Pervert competition on the scale itself is Euro, and I believe 10,000 is the mark or one of monopoly. It's so you you can get a you got a sense of like where competition would lie. So obviously, if we have a high number on the h h I, that is indicative of the fact that it's closer and closer to monopoly. So there you have it. If you guys enjoy this with your explanation, he said, the light. But next to it, I hope you all have a nice day. And thank you for watching
View More Answers From This Book
Find Another Textbook
07:55
In the Land of Purity, there is only one form of pollution, called "gun…
02:48
Explain how the profit-maximizing rule of setting $\mathrm{P}=\mathrm{MC}$ l…
01:28
Small Mom and Pop firms, like inner city grocery stores, sometimes exist eve…
01:02
Education provides both private benefits to those who receive it and broader…
04:48
To what sorts of customers would an insurance company offer a policy with a …
02:27
What would be evidence of serious competition between firms in an industry? …
03:07
Why can firms not just use their own profits for financial capital, with no …
00:30
What is a dividend?
01:29
You are on the board of directors of a private high school, which is hiring …
02:36
What arguments do low-income countries make in international discussions of …