Asked by Jason Brownlee on May 21, 2024
Verified
Which of the following is most likely to increase the Herfindahl index of a particular industry?
A) a horizontal merger between two of the industry's largest firms
B) a vertical merger between one of an industry's largest firms and one of the many input suppliers in the resource market
C) a conglomerate merger involving one of the industry's major firms
D) an agreement by all the industry firms to divide up the market among them
Herfindahl Index
A measure of market concentration calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers.
Horizontal Merger
A merger between companies in the same industry, often aiming to create more market share or reduce competition.
Vertical Merger
A combination of two companies that operate at different stages within the same supply chain of a product or service.
- Identify and differentiate between types of mergers and their significance in antitrust regulation.
- Analyze the effects of mergers and market structures on the Herfindahl index.
Verified Answer
BP
Bindi PatelMay 24, 2024
Final Answer :
A
Explanation :
A horizontal merger between two of the industry's largest firms increases the Herfindahl index by reducing the number of competitors and increasing the market share of the merged entity, thus concentrating the market further.
Learning Objectives
- Identify and differentiate between types of mergers and their significance in antitrust regulation.
- Analyze the effects of mergers and market structures on the Herfindahl index.