# Change in HHI - Shortcut

In working through a question that asked about the change in the HHI as a result of a merger, I noticed a shortcut. I don’t remember it in Schweser, but maybe that’s just my faulty memory. Anyway, to find the change you just have to see the change in those two companies; you can ignore the rest of the industry. For example, let’s say that two companies merge and they each had 10% share. Before: 10^2 + 10^2 = 200 After: 20^2 = 400 Change: 400-200=200 I used to calculate the entire before & after HHI, but that’s unnecessary.

nice. thanks.

Thanks for sharing. I fully agree with you there are shorcuts in the calculations of HHI. There is an other example where you have the total market revenues and the revenues of each firm in the market. If you want to calculate HHI, you would need first to calculate the individual shares first. But you can be much quicker than that… Similarly for the RI problems where you have to calculate the RI using sales, profit margin etc… That can be very lengthy if you do all the calculations. But hopefully you can to straight to the final RI value if you write a few equations… There are many many places where you can speed up the calculations.

one problem with that shortcut: depending on the overall HHI value for the industry, a change of X may or may not bring on a government challenge. if you dont calc the overall HHI for the industry, you dont necessarily know where you fall <1000 not concentrated and no gov interference 1000 - 1800 moderately concentrated and a change of 100 or more may bring in the gov >1800 highly concentrated and 50 or more will bring in the gov

I forget but for the different ranges of HHI, does it matter where we start and where we end? For example if the initial HHI is 1770 and the end HHI is 1820 do we consider the change of 50 to bring in the gov since the ending HHI is >1800 or do we need a change of 100 to bring in the gov since we started at an HHI of 1000 - 1800?

I vote for 100…

100, it uses begin

From Schweser Secret Sauce, page 96, it says “Post-Merger HHI”. So I guess you would use 50.