Calculation of Change in HHI Associated with a Merger Consider

question 114

Multiple Choice

Calculation of Change in HHI Associated with a Merger Consider a market that has three firms with the following market shares:
Firm A 15 percent
Firm B 25 percent
Firm C 60 percent
Suppose Firm B want to acquire Firm A so that the post-acquisition market would exhibit the following shares:
B + A = 40 percent
C = 60 percent
What is the change in the HHI resulting from the merger?

• A)750
• B)4450
• C)5200
• D)No change

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Definitions:

Threat of New Entrants

The potential risk posed by the possibility of new companies entering a market, which can impact the competitive environment and profitability for existing players.

Bargaining Power

The leverage that a party has in negotiations, affecting the terms and conditions of agreements.

Socio-Cultural

Relating to the interaction of social and cultural elements in society, influencing behaviors, values, practices, and institutions.

Competitive

Relating to or characterized by competition; trying to win or be more successful than others.