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Suppose that three firms make up the entire wig manufacturing industry. One has a 50% market share, and the other two have a 25% market share each. The Herfindahl index of this industry is   .   A new firm, Mane Attraction, enters the wig manufacturing industry and immediately captures a 15% share of the market. This would cause the Herfindahl index for the industry to   .   The largest possible value of the Herfindahl index is 10,000 because: An industry with an index higher than 10,000 is automatically regulated by the Justice Department   An index of 10,000 corresponds to 100 firms with a 1% market share each   An index of 10,000 corresponds to a monopoly firm with 100% market share

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Suppose that three firms make up the entire wig manufacturing industry. One has a 50% market share, and the other two have a 25% market share each.

The Herfindahl index of this industry is...

The Herfindahl-Hirschman index (also called Herfindahl index) is a statistical measure of concentration. It is computed as the sum of the squares of market shares (MS) of all of the firms in the market, that is:

HHI = Sum(MSi^2), where MSi is the market share of firm i, and there exist n firms in the market. Thus,

HHI = 50^2 + 25^2 + 25^2 = 3750.

 

A new firm, Mane Attraction, enters the wig manufacturing industry and immediately captures a 15% share of the market. This would cause the Herfindahl index for the industry to...

The HHI decreases with the entry of...

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