Question: Cakes Corp currently has a 60 percent market share in

Cakes, Corp. currently has a 60 percent market share in banking services, followed by Cookies, Inc., with 20 percent and Dippen Dough with 20 percent.
a. What is the concentration ratio as measured by the Herfindahl-Hirschman Index (HHI)?
b. If Cakes, Corp. acquires Cookies, Inc., what will be the new HHI?
c. Assume the Justice department will allow mergers as long as the changes in HHI do not exceed 1,400. What is the minimum amount of assets that Cakes, Corp will have to divest after it merges with Cookies, Inc.?

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  • CreatedSeptember 23, 2014
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