M&B3 3rd Edition by Dean Croushore

Exercise 14

Suppose a banking market consists of banks that have the following shares of the market: 34 percent, 16 percent, 13 percent, 10 percent, 9 percent, 8 percent, 4 percent, 4 percent, and 2 percent.
a Calculate the HHI. Show your work.
b Suppose the largest bank wants to merge with the smallest bank. Calculate the new HHI (after the merger). Show your work.
c Would such a merger be acceptable, according to standard Justice Department guidelines Explain why or why not.