Question: A firm has four divisions food cookware retail and credit services that
A firm has four divisions—food, cookware, retail, and credit services—that generate revenues of $1.5 million, $3.8 million, $5.7 million, and $3.1 million, respectively. Compute the Herfindahl Index (HI) for the firm. The firm is considering the purchase of a rival retailer, which would increase the retail division’s revenues by another $3.2 million. The firm is also considering selling its credit services division. Assuming these two actions occur, what will the HI become? What is the HI if the sale of the credit division does not occur but the rival is acquired?
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