Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 1

An industry consists of three firms with sales of $300,000, $700,000, and $250,000.
a. Calculate the Herfindahl-Hirschman index (HHI).
b. Calculate the four-firm concentration ratio ( C 4).
c. Based on the FTC and DOJ Horizontal Merger Guidelines described in the text, do you think the Department of Justice would attempt to block a horizontal merger between two firms with sales of $300,000 and $250,000? Explain.