A given market was initially segmented evenly among 20 firms (Phase 1). Five years later, the market was still segmented evenly among competing firms, but there were now only 10 firms (Phase 2). Eventually six firms emerged with equal portions of the market (Phase 3), but a move toward deregulation of the industry has prompted two of the firms to merge. Determine the Herfindahl–Hirschman Index for the three phases. Next, determine whether the merger will cause the industry to be considered highly concentrated. In a preemptive move (fearing the FTC), the merged firms agree to sell off portions of the market to the other four firms so that the market will be equally divided among all five firms. How does this affect the HI, and is the merger viable under these circumstances?

  • CreatedMarch 26, 2015
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