Asked by Ashley Sanchez on Jun 26, 2024
Verified
Which one of the following is most likely to increase the Herfindahl index of a particular industry?
A) a conglomerate merger
B) a vertical merger
C) a price-fixing arrangement among all the industry firms
D) a horizontal merger
Herfindahl Index
A measure of the size of firms in relation to the industry and an indicator of the amount of competition among them, calculated as the sum of the squares of the market shares of each firm within the industry.
Conglomerate Merger
A type of merger in which firms involved are in unrelated business activities, aiming for diversification and risk minimization.
Vertical Merger
A combination of two or more companies at different stages of production or distribution in the same industry.
- Examine the impact of mergers and market configurations on the Herfindahl index.
Verified Answer
ZK
Zybrea KnightJul 03, 2024
Final Answer :
D
Explanation :
A horizontal merger, which involves companies at the same stage of production in the same industry, directly reduces the number of competitors and increases market concentration, thereby increasing the Herfindahl index.
Learning Objectives
- Examine the impact of mergers and market configurations on the Herfindahl index.