The airline industry has four major firms with the following

The airline industry has four major firms with the following market shares: 10%, 20%, 30%, 40%. The HHI value for this industry is _____ and the industry is considered _____.

3000; highly concentrated

1500; moderately concentrated

100; not concentrated…100

3000; moderately concentrated

Solution

Calculate HHI -

HHI = (Market share of Firm 1)² + (Market share of Firm 2)² + (Market share of firm 3)² + (Market share of firm 4)²

HHI = (10)² + (20)² + (30)² + (40)² = 100 + 400 + 900 + 1600 = 3000

The HHI value for this industry is 3000.

If HHI value of an industry exceeds 2,500 then that industry is considered as highly concentrated industry.

So, the industry is considered highly concentrated industry.

Hence, the correct answer is the option (1) [3000; highly concentrated].