NISM Certifications · NISM-Series-XV: Research Analyst · Industry Analysis
Three firms in an industry have sales of Rs 500 crore, Rs 300 crore and Rs 200 crore, and no other firm exists. Using market shares, what is the Herfindahl-Hirschman Index (HHI) on the 0 to 10,000 scale?
The HHI is 3,800. Market shares are 50%, 30% and 20% of Rs 1,000 crore total sales, and squaring and adding gives 2,500 + 900 + 400. This indicates a highly concentrated industry.
- A3,800Correct
- B3,333
- C10,000
- D1,900
Explanation
Total sales are Rs 1,000 crore, so shares are 50%, 30% and 20%. HHI = 2500 + 900 + 400 = 3,800. The figure 3,333 would be for three equal firms, and 1,900 wrongly halves the sum.
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