Consider an industry with 10 firms whose market shares are given in the following frequency table:
Market Share # of firms
5 % 2
10 % 7
20 % 1
a. Calculate the HHI for this industry.
b. Suppose the firm with the 20 % market share announces that it plans to buy one of the firms with the 5% market share. Calculate the post-merger HHI. Is it likely that the U.S. Department of Justice will challenge the merger? Why or why not?
c. Suppose one of the firms with a 5% market share announces plans to buy the other firm with the 5% market share. Calculate the post-merger HHI. Is it likely that the U.S. Department of Justice will challenge the merger? Why or why not?
d. Suppose one of the firms with a 10% market share announces plans to buy the firm with the 20% market share. Calculate the post-merger HHI. Is it likely that the U.S. Department of Justice will challenge the merger? Why or why not?