The HHI Is Equal to the Sum of the Squares

question 128

Essay

The HHI is equal to the sum of the squares of the market share of each firm in the industry. Therefore if you take the square of 50 percent and add it to the square of 1 percent multiplied by 50 (because there are 50 firms with 1 percent market share), you will get an HHI of 2,550.

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Definitions:

Cognitive Reaction

The mental process of understanding and making sense of an event or information, leading to a response.

Physiological Arousal

The body's physical response to stimuli, which may include increased heart rate, muscle tension, and perspiration.

Emotional Response

A complex psychological state that occurs as a reaction to an external event, characterized by physiological, behavioral, and cognitive changes.

Interpersonal Intelligence

The capacity to understand and interact effectively with others, one of the multiple intelligences proposed by Howard Gardner.