Question: Schweser Q bank had a question where they basically ask you to evaluate Herfindahl pre and post merger. So, 20 firms with equal market share. 2 merge. What is post HHI? The weird thing is that they are using 18 firms as their new number of firms on the post-merge HHI. My interpretation would be that you should use 19. Start with 20, 2 merge, end up with 19 firms. I guess they could have been implying that 2 firms merge, but not with one another. Anyone else catch this?
can you post the Question ID#?
I get the right answer. 6 firms, equal share = 16.67% each 16.67^2 x 6 = 1667 pre (16.67x2)^2 = 1,111 16.67x4 = 1111 sum = 2222 post (differences in rounding)