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Chapter 26: Q. 3 - Problems (page 597)

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?

Short Answer

Expert verified

The value of HHI can be calculated when the industry's share of sales equals one.

As a result, HHI = 1012.

Step by step solution

01

Given information 

The following numbers are computed:

When the industry's share of sales is equal to one, the value of HHI is one.

02

Explanation

13306-26-3P AID: 4470鈭�11/12/2014

RID: 3603鈭�16/12/2014

When the share of sales for "all others" is equal to one, the value of HHI for the industry is calculated as follows:

HHI=S12+S22+S52+S42+S52+S62+鈥�.Ss2HHI=152+142+122+112+102+102+82+72+1312HHI=225+196+144+121+100+100+64+49+13HHI=1012

Thus,HHI=1012.

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