You are the manager in a market composed of 4 firms, each of which has a 25.00 percent market share. In addition, each firm has a strong financial position and is located within a 100-mile radius of its competitors.
Instruction: Round your answers to the nearest penny (two decimal places).
1. Calculate the premerger Herfindahl-Hirschman index (HHI) for this market.
2. Suppose that any two of these firms merge. What is the postmerger HHI?
3. Based only on the information contained in this question and on the U.S. Department of Justice Horizontal Merger Guidelines described in this chapter, do you think the Justice Department would attempt to block a merger between any two of the firms?
(Select one below)
a) It may but will also consider other factors.
b) It likely will.
c) It likely will not.