-Suppose the Industry for Washing Machines Has Only Four Firms

question 269

Essay

-Suppose the industry for washing machines has only four firms. The market shares are: Firm A, 40 percent; Firm B, 20 percent; Firm C 20, percent; and Firm D, 20 percent.
a) What is the Herfindahl-Hirschman Index (HHI)?
b) If Firms C and D were to announce a merger, would the Department of Justice oppose the merger?

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Definitions:

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, widely used in statistics to quantify the uncertainty or risk.

Diversifiable Risk

A type of risk that can be reduced or eliminated from a portfolio through the process of diversification, as it's not correlated to market risk.

Employees

Individuals who are hired by a company or organization to perform work in exchange for compensation.

Systematic Risk

The potential for loss inherent in the entire market or an entire market segment, also known as market risk or non-diversifiable risk.