Consider an industry with 7 firms whose market shares are given in the following frequency table:
Market Share # of firms
7 % 2
12 % 2
16 % 2
30% 1
a. Calculate the HHI for this industry
For each of the following parts, compare the post-merger HHI with the pre-merger HHI from part a.
b. Suppose the one of the firms with a 12% market share announces that it plans to buy one of the firms with a7% market share. Calculate the post-merger HHI. Is it likely that the U.S. Department of Justice will challengethe merger? Why or why not?
c. Suppose the two firms with a 7% market share announce plans to merge together. Calculate the post-mergerHHI. Is it likely that the U.S. Department of Justice will challenge the merger? Why or why not?
d. Suppose the firm with the 30% market share announces plans to buy one of the firms with a 12% marketshare. Calculate the post-merger HHI. Is it likely that the U.S. Department of Justice will challenge themerger? Why or why not?
